TD Securities On Post-FOMC Asia Fallout

TD Securities note that "Asian markets reacted sharply to the Fed FOMC outcome last night. While we expect further follow through across Asia, we expect it to be measured; Asia is less exposed than other EM regions to Fed policy changes."

• "We do not expect the shift in the Fed's tone to result in significant changes to the outlook for Asian central banks. While most Asia central banks are at the bottom of their easing cycle, we think they need to hold rates lower for longer."
• "There is limited scope to receive front end Asia rates. However, we would not chase the move higher in rates from these levels as markets are already pricing in rate hikes for many central banks."
• "We would not chase duration in Asia at this stage. On the margin we favour IDR 10y LC bonds compared to 10y INR bonds, but both will be hamstrung by higher U.S. yields."
• "We think the USD is basing around current levels. Asian currencies with the highest beta to the DXY over the last 3 months have been KRW, IDR and SGD, suggesting these will be most vulnerable as the USD gains further."