Don’t Forget The Election Hangover And Post Vesak Violence
Elections results in India this Friday, the 16th, and Indonesia over last weekend. Vesak holidays tomorrow may also herald the end of peaceful protests.
Remember Malaysia and Pakistan last year, as I mentioned earlier in Jan this year in the post, Asian Emerging Markets 2014 – Detox Time. https://tradehaven.net/market/fx/asian-emerging-markets-2014-detox-time/
Election euphoria trades have not failed to deliver in the past 2 years, from Thailand and Philippines the year before to Malaysia and Pakistan last year. And the recent outstanding performance in India and Indonesia of late which I touted in my early Mar post, Umami In India – Elections Discussion and Opportunities https://tradehaven.net/market/fx/umami-in-india-elections-discussion-and-opportunities/.
An amazing trade indeed for India. More so for Indonesia even though the hot money (over 60%) had mostly gone into their bonds whereas almost 75% of Indian inflows had gone into their equity market.
The Indian Nifty Index has returned 8.8% year to date and the INR currency has appreciated 3.13% against the USD. That is nearly 12%.
The Indonesian JCI Index has returned 15% this year and the IDR currency has appreciated 5.6% against the USD. That is 20.6% returns for hot money in Indo equities.
What happens after a party ? Hangover. Till the next party which will be the Indonesian Presidential elections and yet another Thai elections (because the February one does not count now).
And using the Asian case studies which have not failed us yet, it is time to take the money off the table.
For the new governments and their teething problems, we should expect the INR to weaken in the days ahead along with the IDR, especially if a decent coalition cannot be formed. Likewise, the equity indices which are in the overbought region are likely to see a correction as well.
This will hold true if the Thai political situation deteriorates further in the days ahead, whilst limited in its contagion effect, we have to bear in mind that post elections do not always come peacefully. India has a more colourful history and tendencies for violence but nothing should be discounted.
From the ground and unverified source, not to visit Bangkok after Vesak. This came from a friend who travels to Thailand regularly on business.
I am not sure if its the Red Shirts’ turn to retaliate but the Yellows have been getting all the attention lately.
Who says Asia is not an amazing place ? Good luck.