Emerging Markets in Asia Could Take Fed Taper Better This Time

• Southeast Asia’s bond and currency traders can afford to be less worried about a potential stimulus tapering by the Federal Reserve, with their markets better positioned to withstand external shocks this time around.
• Massive foreign reserves and undervalued currencies could shield the region’s markets from a potential selloff if Fed Chair Jerome Powell hints at tapering bond purchases at the Jackson Hole symposium this week.
• While there’s caution, analysts aren’t expecting a repeat of the so-called 2013 taper tantrum where the Fed’s surprise announcement to unwind stimulus roiled global markets.  
• “Partly due to the taper tantrum in 2013, Southeast Asia’s central banks now have better foreign-exchange-reserve cushions,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The degree of Treasury curve steepening appears far more subdued this time around, which may be conflated with reduced pressure for the capital flight out of Emerging-Asia.”

(Source: Bloomberg)