Analysts have warned that the broad and steep US tariffs that will be announced this week will pose “severe challenges” to emerging economies that rely heavily on exports.
Concerns that the broad and steep tariffs announced by the United States this week will have an impact on trade-reliant emerging economies, many of which have massive trade surpluses with the United States, caused Asian share markets to plummet on Monday.
A measure of Asian emerging market equities fell 2%, reaching its lowest level since early March, while MSCI’s broadest index of Asia-Pacific shares outside of Japan fell nearly 2%.
On the final trading day of the quarter, the majority of emerging Asian stocks fell to multi-month lows, despite the fact that major Southeast Asian markets such as Indonesia, Malaysia, and Singapore were closed for public holidays.
South Korea’s KOSPI fell 3% to an eight-week low as it is Asia’s most vulnerable country to US auto tariffs.
Taiwan’s export of high-tech goods, such as semiconductors, positions it as one of the “Dirty 15” economies with significant trade surpluses with the United States. The dollar was nearing a nine-year low, and the benchmark index fell 4%.
“This (tariffs) poses serious challenges for Asia, whose recent economic success was largely based on exports,” HSBC analysts wrote.
Delta Electronics Thailand fell as much as 5% on the day, bringing Thailand’s benchmark to a level nearly five years below its peak.
Because of stretched valuations and concerns about core earnings, the electronics component manufacturer’s stock has lost more than half of its value since reaching an all-time high in November.
The majority of Southeast Asian stocks were expected to post significant quarterly losses. Thailand’s stock market has fallen by more than 17% in the last three months, while Indonesia’s and Malaysia’s have lost about 8%.
Foreign investors withdrew more than $4 billion from Southeast Asian stocks in the March quarter, marking the largest outflow since 2020.
The majority of Southeast Asian currencies rose slightly against the dollar on Monday, owing to pressure from a flight to US Treasury bonds.
On Monday, the Singapore dollar, Philippine peso, and Thai baht all saw modest gains in value against the US dollar. By the end of the March quarter, all three currencies were expected to outperform the US dollar.
Despite the fact that most regional currencies appear to have escaped the tariff craze unscathed in the first quarter, MUFG analysts expect the next three months to be different.
They wrote, “In Q2, we expect an overall depreciation of Asian currencies against the dollar.”
“However, certain currencies would depreciate more than others due to differences in exposure to tariffs and country-specific factors.”
India’s, Malaysia’s, Singapore’s, and Indonesia’s markets were all closed on public holidays.
