Implications Of A Fed Funds Rate Hike On Asian Securities

Implications Of A Fed Funds Rate Hike On Asian Securities by Gerald M. Hwang, CFA, Matthews Asia

The prospect of a higher U.S. federal funds rate can make U.S. cash and short duration Treasurys look more attractive vs. risky assets. The effect of higher U.S. short rates is felt across all asset classes, regardless of the pattern of cash flows or currency of denomination. We can expect some market reallocation out of risky assets and into risk-free assets. But why does the market seem to fear a wholesale shift out of risky assets and why might that view be unjustified? This month, we examine the ways in which an initial rate change impulse in the U.S. could affect...