HSBC Global Viewpoint Under the Banyan Tree - Asian investors and US volatility
Jun 12, 2025
Asian investors are reevaluating their focus on the U.S. amid market volatility. The discussion highlights how macroeconomic factors and the U.S. dollar influence investment decisions. There's a shift towards reinvesting in local markets rather than U.S. bonds, driven by changes in global capital flows. The resurgence of IPOs in Hong Kong and challenges for ASEAN listings reveal varying liquidity across Asia. Moreover, the return of Chinese companies to Hong Kong underscores exciting developments, reshaping the landscape for investors in the region.
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U.S. Borrowing From Surplus Countries
- The U.S. imports significant capital from countries like Germany, China, and Japan to fund its budget deficit.\n- Around 50% of U.S. borrowing comes from current account surplus countries such as Germany and China.
Home Bias in Capital Flows
- When foreign investors pull money out of U.S. bonds, that capital often returns to their home regions.\n- This creates a home bias, strengthening their local currencies against the U.S. dollar.
Capital Shift Impact on Competitiveness
- If Asian investors permanently shift capital away from the U.S., the cost of capital in the U.S. will rise due to higher bond yields.\n- This could give Asian companies a competitive advantage with lower borrowing costs and thus higher growth potential.