Asian investors and businesses look to de-risk from the United States amid rising US-China tensions

Asia’s wealthy seek to hedge against Uncle Sam: As geopolitical tensions between China and the US escalate, investors and businesses in Asia are increasingly seeking ways to diversify away from America, Reuters reports. Driving the fears is the concern that US banks and businesses may be pressured into stepping back from business in the region, whose economy is thoroughly entwined with China.

It takes two: US firms and investors have for years been looking to reduce their reliance on China and strengthen the resilience of supply chains by also investing in other countries in addition to China. But now, US companies and investors that have long pursued the “China plus one” approach are coming across their counterparts in Asia pursuing their own “America plus one” approach.

All roads lead to anywhere but the US: Asian companies are now looking towards our part of the world for funding and towards South East Asia to build factories. The region’s business community is also reconsidering its relationship with the world’s reserve currency, and are now beginning to look elsewhere to reduce their dependence on the USD, according to the newswire.

But don’t expect to see Asia de-dollarize overnight: Despite ongoing negotiations between the central banks of China, Hong Kong, Thailand, and the UAE to start settling cross-border transactions in local currencies and a steady turn away from the Asia and world’s reliance on the USD, the USD still accounts for some 60% of global FX reserves.

ALSO WORTH NOTING FROM PLANET FINANCE-

The International Monetary Fund sees China’s economy growing 5% this year, up from its previous forecast of 4.6% growth for the world’s second largest economy. However, the Fund warned that growth would slow to 4.5% next year, and to 3.3% by 2029 due to “an aging population and slower expansion in productivity.” (Reuters)

All 82 economists in a Reuters poll see the European Central Bank cutting interest rates in June, with a majority also forecasting further cuts in September and December.

MARKETS THIS MORNING-

Asian markets are in the green amid a slew of fresh economic data, including industrial output figures and inflation in Japan. Leading gains is South Korea’s Kospi, up 1.07% in response to an uptick in industrial output data. Japan’s Nikkei 225 is also up 0.23%, with the broader Topix index gaining 0.7%.

THE CLOSING BELL-

The ADX rose 0.5% yesterday on turnover of AED 1.1 bn. The index is down 8.6% YTD.

In the green: Bildco (+14.6%), Ras Al Khaimah Ins. (+11.1%) and Apex Investment (+11.1%).

In the red: Gulf Cement (-6.2%), Al Khaleej Investment (-6.0%) and Agility Global (-4.4%).

Over on the DFM, the index rose 0.3% on turnover of AED 368.9 mn. Meanwhile Nasdaq Dubai closed up 1.2%.

CORPORATE ACTIONS-

Real estate firm Manazel has approved a capital increase of AED 520 mn, through offering 520 mn new shares at AED 1 apiece to its existing shareholders and external investors, according to an ADX disclosure (pdf). The new shares issuance will bring Manazel’s total capital to AED 3.12 bn, up from AED 2.6 bn.

BHM Capital’s contract as Al Ansari Financial Services’ liquidity provider for its shares on the DFM will lapse on 28 June, according to a DFM disclosure (pdf). Both firms have mutually agreed not to extend it for another term.