The unusual moves have shown that some investors are reconsidering what might be the best safe havens to turn to, with traders quickly pulling out of popular assets that were considered good bets such as chip stocks and Japanese shares.
Here are some examples of what investors have bought — or dumped — that may completely surprise you.
Gold has lost its luster
Commodities took a beating Monday as the tremors that have swept stock markets spilled over into raw materials. Gold’s slide — where spot prices fell as much as 3.2 percent at one point — may come as a surprise to some given the metal’s long-standing reputation as a safe haven asset.
Indeed, history suggests that in times of extreme turmoil, gold also tends to weaken as some traders are forced to cover unexpected margin calls when the underlying asset falls. Goldman Sachs Group Inc., which remains very bullish on the yellow metal’s outlook, said that this dynamic may have been at play in Monday’s session.
“The precious metal could suffer negative spillovers from broader market crashes as investors are forced to liquidate gold positions to cover margin calls,” analysts including Dan Struyven said in a note, while reiterating Goldman Sachs’ target for gold to rise to a record high of $2,700 an ounce by 2025.
A margin call is a request from a broker to an investor to deposit more money into his account. This occurs when the value of the securities that the investor bought using margin (i.e. a loan from the broker) falls to a certain level.
Malaysian rial goes against the tide
While risk-sensitive major currencies such as the Australian dollar, Mexican peso and South African rand all fell against the greenback, the Malaysian rial at one point saw its best daily rise since 2015, outperforming all its emerging market peers on Monday.
That’s a huge reversal for the struggling currency, which in February hit its lowest level against the dollar since 1998. The rial now looks set to rebound as optimism grows over Malaysia’s growth, with second-quarter GDP beating all estimates. Foreign bond inflows and improving technology exports are also helping to support the rial.
Chinese borrowers move forward
Many Chinese borrowers turned to the cheaper and relatively stable yuan bond market to offer debt in a week of extreme volatility elsewhere, even as high-grade U.S. borrowers shied away.
In the offshore yuan market on Tuesday, Pizhou Industrial Investment Holding Group Co., a local government financing vehicle, marketed three-year yuan-denominated bonds with a 5 percent coupon.
Meanwhile, the Shenzhen government has required banks to offer multi-tranche yuan bonds, following deals by state-owned Jiangsu Rongxin City Investment Group and Huangshi Asset Management Co.
Lower funding costs for yuan-denominated debt are supporting the banking sector. The three-month interbank offered rate for the Chinese yuan in Hong Kong, also known as CNH Hibor, fell to 2.06 percent on Tuesday, the lowest in more than three years, according to Bloomberg data.
Mongolia Stock Exchange
The Ulaanbaatar Stock Exchange Top 20 Index, which tracks Mongolia’s 20 largest companies, closed Monday’s session up 1 percent — making it the only benchmark in the green in Asia and one of four in the world, according to Bloomberg data (the others were indexes in Jamaica, Montenegro and Tunisia).
Tavantulgoy Mining Company and Sowo Dairy Company were the biggest gainers on the scale.
The country’s stock market, dominated by consumer staples and materials companies, has been negatively correlated with the performance of the MSCI Asia Pacific Index since late last month, Bloomberg data showed.
A glimmer of hope for developers in Hong Kong
Of the 11 property developers in the Hang Seng Real Estate Index, nine out of 11 rose on Monday.
Shopping mall operator Wharf Real Estate Investment was the top gainer on the benchmark Hang Seng Index after surging more than 6 percent, its best gain in more than two years. New World Development and Sun Hung Kai Properties each rose more than 4.5 percent.
Although retail spending and house prices in Hong Kong remain weak, faster-than-expected interest rate cuts in the United States will force the Asian financial hub to follow suit, given its currency’s peg to the dollar.
Cheaper mortgages could boost home buying and boost property developers. The offshore yuan also rose to its highest level since December on Monday, suggesting Chinese buyers may be shopping more in Hong Kong in the near future because they may feel richer.
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