Goldman Realizes Stock Rotation Hurts Gain, Taiwan Dollar, Ringgit

Goldman Realizes Stock Rotation Hurts Gain, Taiwan Dollar, Ringgit

“Given the relatively large share of growth stocks in the U.S. market and low conviction on the broad risk outlook due to likely downgrades to Asia growth expectations — the won, Taiwan dollar, and ringgit could see the biggest volatility-adjusted losses,” Fishman said.

Goldman Sachs Group Inc. cautioned that the South Korean won, Malaysia’s ringgit and the Taiwan dollar could debilitate assuming development stocks keep on sliding. The underperformance of development stocks corresponds with more fragile tech-centric emerging market currencies when hazard opinion is less favorable, the bank’s New-York based specialist Karen Reichgott Fishman wrote in a note. Asian currencies are feeling the squeeze as possibilities of speedier rate climbs in the U.S. support the dollar.

The outlook for tighter monetary policy in the U.S. and higher Treasury yields have been weighing on technology shares globally, prompting a rotation from growth to value stocks.

However, some say it may be time to rein in bearish bets on emerging market currencies as they are in a better position to withstand the impact of Federal Reserve rate hikes. The ringgit is Asia’s second worst-performing currency so far this year with a loss of 0.4% while the won is down 0.1% and the Taiwan dollar is up 0.1%.

Goldman also said it’s best to own the Canadian, Australian and Mexican currencies amid a growth-to-value stock rotation when global risk sentiment is constructive.

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