MELBOURNE – The US Federal Reserve’s decision to cut its benchmark interest rate by 50 basis points is likely to be a positive for Asian stocks as it gives the region’s central banks more room to loosen policy, analysts say.
The rate cut will ease the pressure of tight monetary policy and assuage concern about weakening local currencies, said Mr Gary Dugan, chief executive officer at Dalma Capital.
Mr Brad Bechtel, global head of foreign exchange at Jefferies, said the outcome is good for risk assets and high-yield currencies but forex moves may be muted in Asia as the Chinese yuan serves as an anchor.
Here is a selection of comments from analysts.
Straits Investment Management chief executive officer Manish Bhargava:
Lower US interest rates could boost risk appetite for Asian stocks, driving capital inflows into emerging markets as investors seek higher returns.
The initial phase of the Fed’s normalisation cycle has been more assertive than expected, as the central bank recalibrated its policy focus to address labour market conditions. While inflation remains a key concern, recent softening in employment metrics has prompted the Fed to adjust its strategy, emphasising support for the job market in the near term.
Dalma Capital CEO Gary Dugan:
The Fed action should be taken very positively by Asian markets. It relieves the pressure of tight monetary policy and with likely weakness in the US dollar, it allows Asian central banks to ease monetary policy without fear of prompting weakness in their own currencies.
We expect further strength in interest-rate sensitive stocks such as financials and real estate investment trusts. We also expect domestic consumer stocks to do well in anticipation of higher confidence among consumers. Borrowing costs have been (high) and now, they should be headed down.
BetaShares Holdings head of fixed income Chamath De Silva:
