Where will Fed tightening hit hardest in Asia?: Manishi Raychaudhuri
SPY•The author says further U.S. rate increases could deepen pressure on Asian currencies and equity valuations, with current-account-deficit economies such as India, Indonesia and the Philippines particularly exposed. Estimated monthly foreign-equity outflows reached a record $192 billion through Sept. 25, while the Asia Market Index’s forward P/E fell to 12.5 from 16.7.
1. Outflows and inflation
The author says higher U.S. yields can draw investment from emerging Asian markets, weakening currencies and adding to inflation. Estimated monthly foreign-equity outflows reached a record $192 billion through Sept. 25, compared with a previous 2025 peak of $45 billion. India, Indonesia and the Philippines, which have current-account deficits, were among the currencies hit hardest; inflation at the end of August stood at 4.8%, 3.2% and 6.1%, respectively.
2. Valuations diverge
As the average 10-year yield in Asia rose from 3.4% in late October 2025 to 4.2% in late September, the FactSet Asia Market Index’s 12-month forward P/E declined from 16.7 to 12.5. The author says technology, leveraged businesses and credit-dependent sectors could face greater pressure, while banks and insurers may benefit from rising rates. Financials account for 47% of Singapore’s market, 32% of Hong Kong’s, 31% of Malaysia’s and 26% of India’s.
