India, viewed as a manufacturing alternative to China, is appealing to investors for its relative immunity to global risks given a domestic-driven economy
Our Bureau
Washington, DC
Donald Trump’s election victory is seen changing the course of near-term money flows for three of Asia’s largest equity markets as tariff risks loom large over Chinese assets.
Market watchers see the possibility of funds flowing into India and Japan while investors assess Trump’s anti-China stance, with the president-elect earlier having threatened to put tariffs of as much as 60% on Chinese goods. Morgan Stanley just reiterated its preference for the two nations’ shares over China’s, according to a Bloomberg projection.
India, viewed as a manufacturing alternative to China, is appealing to investors for its relative immunity to global risks given a domestic-driven economy. Japanese stocks are seen as indirect beneficiaries of Trump’s reflationary economic policy — which is expected to keep interest rates high, thereby boosting the dollar and weakening the yen to the advantage of the Asian nation’s exporters.
“Supply chains have been moving away from China and that helps not only Japan and India but also other countries, particularly in Southeast Asia,” said veteran emerging-market investor Mark Mobius. “India is the big beneficiary since only India’s workforce can match the Chinese in numbers and labor costs. With Trump maintaining or even extending trade restrictions on China, this will be positive for India.”
That suggests Wednesday’s price action in Asia is likely to have been a sign of things to come. As it became clear that Trump will return to the White House, the MSCI Japan Index and the MSCI India Index rallied at least 1.5% each to cap their best day so far this quarter, while the MSCI China Index slumped over 2%.
The threat of tariffs is seen complicating Beijing’s efforts to revive the economy and lift market sentiment through a series of stimulus measures that began late September. This makes the nation’s ongoing legislature meeting all the more crucial for investors.
In a recent interview, Trump was asked whether he would consider military force in response to a potential Chinese blockade of Taiwan. He asserted that such action would not be necessary, claiming that Chinese President Xi Jinping respects him, stating, “I wouldn’t have to, because he respects me and he knows I’m f– crazy.”
Trump, who served as President from 2017 to 2021, previously adopted a tough stance against China, implementing multiple rounds of tariffs that sparked a trade war and had widespread implications for the global economy.
US Secretary of the Treasury Janet Yellen has described Trump’s idea of sweeping tariffs as a “deeply misguided” approach in a speech at the Council on Foreign Relations on Thursday, October 17. Yellen warned that broad tariffs would likely raise costs for American families and diminish the competitiveness of US businesses.
Meanwhile, the European Commission has given the final green light to steep tariffs on electric vehicles (EVs) made in China, officially closing the probe that began one year ago, as per Euro News. They are set to remain in place for the next five years.
Brussels will continue negotiations with Beijing so as to secure a deal on minimum prices that can replace the tariffs. It was observed by Euro News that this solution which was advocated by Germany is highly complex and would be difficult to implement.
As per Euro News, the entry into force was widely expected after the inconclusive vote earlier this month where member states failed to mount the necessary majority in favour or against the measures.
The Commission invoked its trade powers to break the impasse and approve the duties, which come on top of the existing 10% rate and vary according to brands. For instance, for Tesla, it is 7.8 per cent, BYD, 17 per cent; Geely, 18.8 per cent; SAIC at 35.3 per cent; other EV producers in China who cooperated in the investigation but have not been individually sampled, 20.7 per cent, and other EV producers in China who did not cooperate, 35.3 per cent.
The financial aid provided to the Chinese producers has resulted in them selling their products at lower prices than compared with those of their European competitors, the Commission attested.
Because of this it was observed that the Chinese firms’ EV sales in Europe have increased at extraordinary pace with their market share jumping from 1.9 per cent in 2020 to 14.1 per cent in the second quarter of 2024, according to the Commission’s estimations.
“There’s a clear and imminent threat to our car industry not making the transition to electric vehicles and being therefore wiped out,” a senior EU official said on Tuesday, speaking on condition of anonymity.
