Stocks in emerging Asian economies retreated on Friday from recent peaks as caution set in ahead of US President Donald Trump’s July 9 tariff deadline, while currencies crawled higher as the dollar struggled to hold onto Thursday’s gains.
An MSCI gauge of equities in emerging Asia slid nearly 1 percent from a 3-1/2-year high notched in the previous session. Stocks in South Korea and Taiwan, making up more than a third of the index, weighed the most.
A trade deal announced on Thursday between the United States and Vietnam sparked hopes among emerging economies in the region for a potential breakthrough with Washington ahead of the July 9 deadline.
But scant details on the deal, tariffs well above pre-April 2 levels, and little clarity on how trans-shipments from China would be levied mean Asian countries will have to straddle a fine line between the world’s two largest economies.
“It would be remiss to ignore the critical pillar of US trade deals with the rest of Asia, which is trained on undermining China’s economic reach and influence,” said Vishnu Varathan, head of macro research for Asia excluding Japan at Mizuho Securities.
“And so, other Asian economies will be particularly vulnerable to a two-sided geoeconomic squeeze given that their reliance on both China and the US is significant.”
Cautious investors will be keenly watching Trump’s approach to tariffs and whether trade partners can secure best deals for their countries before the deadline.
In South Korea, the benchmark KOSPI fell 2 percent from a near four-year high, marking its worst drop since April 7. Taiwan’s benchmark index slipped from a near four-month high.
Stocks in the Philippines fell 0.7 percent from a more than six-week peak, while those in Singapore eased off from a record-closing high. Thai stocks came off a three-week peak, snapping a four-session rally.
