Hang Seng Sinks, Nikkei Jumps as Investors Bet on Trump Trades

Markets across Asia made mixed moves on Wednesday as investors put “Trump trades” into play in the hours before the Republican candidate claimed a stunning victory as the United States’ next president.

While Donald Trump’s ‘win’ was far from known in early Asian market hours, trends at the time suggested the 78-year-old was on track to recapture the White House.

In China and Hong Kong, that meant any opening gains were wiped out as investors watched the progress of the poll. And by the time Chinese markets closed, Trump had claimed victory over Democrat Kamala Harris in the tight race.

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The Shanghai Composite index, which was up marginally by 0.16% at midday break reversed its sliver of gains to close down by 0.09%. China’s blue-chip CSI300 Index also fell 0.5%.

Meanwhile, stocks in Hong Kong, which tend to be traded by foreigners and used by hedge funds who want to bet against Chinese assets, saw a rougher day.

The Hang Seng China Enterprises Index which tracks mainland securities listed in Hong Kong, slumped a sharp 2.84% as investor concern rose over the prospect of higher tariffs.

As part of his pitch to boost American manufacturing, Trump had promised voters he will impose tariffs of 60% or more on goods from China.

“Right now, the markets are focusing narrowly on the prospect of tariffs because it is the easiest lever to pull directly under a presidential executive order, but we’ve seen between 2016-20 and other levers that can be pulled to contain China,” Rong Ren Goh, a portfolio manager in the fixed income team at Eastspring Investments, said.

“It can include financial sanctions on Chinese entities, further tightening the screws on Chinese access to technology critical to AI development… the list goes on.”

Those worries led to broad declines in Hong Kong-listed China tech stocks. E-commerce giant JD.com slumped 5.2%, while Alibaba and Meituan were down 4% and 3.7%, respectively.

China’s equity market is in the midst of recovering from a years-long slump as authorities promise to address weak consumption and a downturn in the real estate sector. The CSI-300 index is up more than 20% since September 23, when Beijing started rolling out rate cuts and promises of large stimulus.

But a Trump win could stymie that rally, with technology, defence and export sectors in the crosshairs of his policies. And foreign investors are likely to position themselves defensively on any China-related assets.

Yuan in for rough days

Trump’s proposed tariff and tax policies are also viewed as inflationary and therefore likely to keep US interest rates high and undermine currencies of trading partners.

Those expectations meant the dollar was set for its biggest one-day rise since March 2020 against major peers on Wednesday.

The dollar index — which measures the currency against six major peers — advanced 1.9% to 105.33 as of 1300 GMT, a four-month peak. And while the currency’s climb hurt Asian currencies across the board, China’s yuan was among the most vulnerable.

The offshore yuan fell more than 1% versus the dollar, to its weakest since mid-August. Its onshore counterpart was also down more than 0.8%, and China’s major state-owned banks were selling dollars to prevent the yuan from weakening too fast.

Experts believe the yuan will only fall further under a Trump presidency.

During Trump’s first presidency, the yuan weakened about 5% against the dollar during the initial round of US tariffs on Chinese goods in 2018, and fell another 1.5% a year later when trade tensions escalated.

Other Asian currencies that took sharp hits over Trump’s comeback were the Singapore’s dollar, Thailand’s baht and Indonesian rupiah. The South Korean won also slipped to its lowest since November 2022.

Analysts believe Trump’s win will hit the South Korean won, Singapore dollar, Thai baht and Malaysian ringgit harder than other Asian currencies because of their export orientation and sensitivity to a potential slowdown in China’s growth.

Japanese stocks euphoric

The early prospects of Trump’s win did not sullen the mood across the continent, however.

In Japan, investors ploughed in money into chip and defence stocks to lead the Nikkei share average to end at a three-week high. The index jumped 2.61% to 39,480.67.

The broader Topix ended 1.94% higher at 2,715.92.

Among the biggest gainers were Japanese technology stocks, led by chip-testing equipment maker Advantest, which jumped 8%. The Nikkei also accelerated gains as the dollar strengthened against the yen and boosted export-sector shares.

Defence stocks such as IHI, Mitsubishi Heavy Industries and and Kawasaki Heavy Industries also saw sharp jumps. “This is a typical Trump trade,” said Takashi Hiroki, chief strategist at Monex, because Trump is likely to ask Japan to rely less on the US for its own defence.

A Trump victory was also seen favourable in India, where tech stocks saw their best day in four months.

Trump’s return will “likely result in more spending in the US, and is a positive for India due to New Delhi’s constructive relationship with the US and the Republican candidate,” Anita Rangan, an economist at Equirus, said.

“Trump’s plans to lower corporate taxes could also benefit Indian IT companies on the demand side, while China +1 trade will help many domestic sectors,” according to Jefferies.

Bitcoin at all-time-high

Trump trades took off in other markets too, with bitcoin climbing 8.6% to reach a record $75,120. Trump is seen as more actively supportive of cryptocurrencies than Harris.

US stock futures were also firmly in the green, jumping as much as 2% at one point. Among the biggest winners was Tesla, whose shares were up more than 12% pre-market, thanks to its chief Elon Musk’s support for Trump.

Musk poured more than $100 million into a super PAC mobilising Trump voters and used his social media site X to amplify pro-Trump messaging. In return, Trump promised Musk roles in his administration.

On the whole, a Republican sweep would mean “more expansionary fiscal policy,” said Kirstine Kundby-Nielsen, FX analyst at Danske Bank.

“A more expansionary fiscal policy and ‘America first’ approach will support US assets, including the dollar.”

The sharp rise in the dollar, meanwhile, pressured oil prices, and other commodities, as it makes them more expensive when buying in other currencies.

Reuters, with additional editing and inputs from Vishakha Saxena

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]