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JPMorgan trims emerging market exposure as U.S. elections nears

Chinese 100 yuan banknotes are seen in this picture illustration taken in Beijing July 11, 2013. REUTERS/Jason Lee/File Photo

LONDON (Reuters) - JPMorgan said on Friday it had started reducing exposure to some emerging market assets with the U.S. election drawing closer and predicted China’s yuan might weaken less-than-expected if President Donald Trump secured a second term in the White House.

The bank said the news overnight that Trump had tested positive for coronavirus could “bring forward” pre-election market caution.

It said was trimming exposure to emerging Asia and had in local markets added to “low yielders” while cutting back on holdings of higher yielding debt, such as Indonesia government bonds.

JPMorgan said it had started trimming emerging market FX positions as well and laid out a number of big swings for China’s yuan depending on the result of the U.S. election.

“The Trump victory scenario is the one that worries EM investors, given the President’s history of unilateral tariff action and crowded positions,” a group of JPMorgan’s emerging markets strategists wrote in a note to clients.

“Our judgment is that CNY may weaken less than feared in a Trump victory scenario, and levels of north of 7.0 may be hard to sustain.”

Reporting by Karin Strohecker; editing by Marc Jones

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