Asian Market Outlook - December 2024 (B&I Capital)

November was another challenging month with the results of the US election weighing on the REIT space and Asian currencies. However, there was a decent recovery starting mid-month and we did start to see a recovery in the JPY as attention is now shifting to monetary policy with upcoming meetings by the Fed and BOJ. Overall, we expect that the BOJ has enough justification to move again in December as US jobs and growth continue to be solid which reduces the likelihood of aggressive Fed interest rate cuts and Japan’s economic data continues to be solid. Inflation is running above the BOJ target for 30 consecutive months and while there are some more dovish members that may dissent, we expect another hike this December. 

Trump 2.0 has become a major worry for Asia and the impact of higher rates and weaker currencies led to a sharp sell-off in October well before the election. The magnitude was similar to the sell-off following Trump’s surprise victory in 2016 as were the concerns (i.e., protectionist policies, inflation concerns). RE Securities in Asia ended up rallying from the December 2016 lows about one month after the election and rose 15% from the bottom despite overall economic concerns including interest rates. The Fed raised interest rates three times in 2017. What appears different this time is that the correction started well before the election result in both securities and currencies and while the pace of interest rate cuts could be dialled back from previous expectations, it is unlikely the Fed will tighten in 2025. 

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