Surprisingly good prospects for some East Asian stock markets

Relative easing of international tensions around “the Gulf“ and low risks of escalation of the US-China trade war support Asian export currencies, South Koreas won (KRW) and Taiwan dollar (TWD) in particular.

According to analysts from Reuters Polls, Bloomberg and Alpho, the U.S.-Iran tensions easing will lead to growing interest of investors in risky assets in upcoming weeks. Such a progress will result in demand for currencies of Asian emerging markets, mainly Indian rupee (INR) and South Korean won (KRW).

ASML Holding NV is major semiconductor chip equipment manufacturer. While Taiwan semiconductor import has been growing last two months, South Korea’s semiconductor export fell 17.7% year-on-year in December following its 30,8% decrease in previous month. Nevertheless, the fall was not as low as expected. In terms of volume, however, overseas semiconductor supply grew in 7,9% compared with a year earlier. Peter Wennink, President and CEO of ASML, attended conference in Barcelona in the beginning of November 2019, and expressed his expectations on strong demand for semiconductors in 2020 – mainly from logic chip makers.

According to official data, Taiwan’s semiconductor devices import grew in November and December in 156,4%, or more precisely in 158,6%. Furthermore, South Korea’s and Taiwan’s import to China and growing industrial production stabilizes and improves.

Based on attitudes of main central banks (FED, ECB) and first signs of global trade recovery it is a great signal to support export-based currencies – mainly mentioned KRW and TWD, according to the Alpho analysis. Moreover, released tensions in the US-China trade war support the progress, too.

American president Donald Trump and Iran representatives signal so far they want no more military escalation. Middle East tensions easing and partial solution to the US-China trade war could strongly support Asian currencies and stock markets in first half-year period.

Second half-year period outlook depends partly on the US presidential election process, campaign style and probability that Donald Trump defends his mandate. Possibility of Brexit failure, custom duties between the US and EU and second phase of the US-China trade deal negotiations still pose a high risk for the outlook.

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