Risk markets from China tech to EM currencies are back in favour

Risk markets from China tech to EM currencies are back in favour

Bloomberg / Beijing

Some of Asia’s most risk-sensitive currencies and stocks are back in favour as China reopens its economy and traders bet that the dollar may have peaked for now.

South Korea’s won and the offshore yuan have rallied over 1% since Shanghai started rolling back virus curbs in mid-May. The region’s stocks have also climbed, with the Hang Seng Tech Index advancing almost 3% during the period.

The reopening of China’s economy has sparked a swift turnaround in sentiment toward Asia, as investors bet that the move will ease supply-chain disruptions and spur demand for commodities. Speculation that the dollar may have hit a ceiling for now is also lending support, with the likes of Goldman Sachs Group Inc and Fidelity International seeking to add to their emerging-market portfolios.

Gains in Asian currencies this week were spurred by factors including a pullback in the dollar, easing restrictions in Shanghai and better-than-expected China PMI data, said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. “The Korean won and Taiwan dollar, which are the most sensitive to equity flows, stand to benefit the most,” he added.

The won led gains in emerging Asian currencies on Friday,