Investors flee Wall Street turmoil for gold, EMs, and niche markets

Investor exodus from Wall Street spurs search for alternative safe havens: US policy shocks are driving investors out of Wall Street to niche and previously riskier assets, including emerging markets, Latin American currencies, and gold.

Where is the money going? Banknotes and emerging markets are the top choices for investors looking for a refuge from Wall Street’s volatility, according to a JP Morgan survey of the IMF and World Bank’s spring meetup attendees, cited by Reuters. Some investors are also turning to regions with stronger outlooks, including Saudi Arabia after strong gains for stocks in the past three weeks, and India, which enjoys good trade ties with the US.

Emerging markets are also gaining favor: Investors with large portfolios are turning to volatile emerging markets and esoteric credit, considering them relatively safe for the time being. Emerging market bonds are among assets that can now be considered “attractive risk-adjusted opportunities,” Principal’s Mike Goosay told the newswire.

Many smaller, higher-risk markets outperformed in April, with Mexican equities up 14% and Latin American currencies gaining 3%. This comes at a time when US stocks posted a third monthly loss, and the greenback hit a three-year low over the same period.

BUT- The sheer volume of capital exiting the US seems to be overwhelming safe havens, Goshawk Asset Management’s Simon Edelsten told Reuters. The JPY was pushed up over 4% this month, while Germany’s 10-year bond yield slumped to nearly 200 basis points below US treasuries. Gold — the traditional safe haven — also bounced to a record USD 3.5k per ounce on April 22.

Europe has also been hit hard: After briefly benefiting from US outflows, European markets are now under pressure as the EUR’s sharp rise threatens export competitiveness. The currency has climbed 10% in two months, stalling equity gains and prompting Bank of America to warn of a possible 10% further decline in European stocks.

MARKETS THIS MORNING-

Asian markets are mostly on the rise this morning, with Hong Kong’s Hang Send up 0.5%, and Japan’s Nikkei up 0.4%, while Shanghai Composite is slightly inching down 0.2%. Meanwhile, Wall Street futures are signalling a higher open for US markets, after Microsoft and Meta earnings beat analyst expectations.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.6% yesterday on turnover of SAR 6.9 bn. The index is down 3.0% YTD.

In the green: Jamjoom Pharma (+9.9%), Alyamamah Steel (+4.7%) and Buruj (+4.5%).

In the red: MBC Group (-4.4%), Nice One (-4.0%) and Saudi Re (-3.8%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.2% yesterday on turnover of SAR 25.8 mn. The index is down 10.2% YTD.

In the green: Paper Home (+5.3%), Knowledgenet (+4.3%) and Enma Alrawabi (+3.9%).

In the red: Albattal Factory (-6.1%), Tibbiyah (-5.7%) and Taqat (-5.7%).

CORPORATE ACTIONS-

Tadawul-listed Saudi Advanced Industries Company (SAIC)’s board doubled its proposedFY 2024 dividend to SAR 1.0 per share from SAR 0.50 — raising the total distribution to SAR 59 mn, it said in a disclosure to Tadawul. Distribution date will be announced following shareholder approval.