US fiscal deal could spell trouble for Asia's investment winners
Investors could start to shift some money out of overpriced or crowded Asian investments in favour of the United States on the view that the fiscal deal manages to avert a U.S. recession and so boosts the prospects for American stocks.
A fall in U.S. equities as funds pulled out some money in the fourth quarter, in contrast to a rally in Asia as funds funnelled money into the region, suggest conditions are ripe for some reversal.
"In the short term, U.S. risk premium will come down now that a deal has been struck and might trigger some reversal of flows from Asia back to the U.S.", said Hong Hao, chief equity strategist at Bank of Communication International Securities.
Analysts do not expect a major reversal of funds, but more of a subtle shift as some money managers rebalance their portfolios by taking profits on Asian positions and moving those funds into prospective bets in the United States.
The S&P 500 fell 1 percent from September through December last year in the build up to the presidential election and the so-called fiscal cliff. Markets had worried
that in the absence of Congressional action, $600 billion in scheduled tax increases and spending plans would tip the world's biggest economy into a recession.
At the same