💱Fed cut: What happens in Asia?

🇯🇵 Nomura hits pause: The Japanese investment bank expects no further rate cuts in December following the Fed’s 25-bp reduction. U.S. labor and demand data are softening slightly but show no clear weakness. For 2026, Nomura forecasts three more 25-bp cuts (March, June, September).

👀 Pressure and divergence: A stronger dollar and higher U.S. yields are weighing on India and parts of Southeast Asia. Capital is flowing into more stable markets like Japan, Korea, and China. Tech and export sectors remain the main winners.

🇭🇰 Hong Kong follows suit: The HKMA cut its base rate to 4.25%. That eases financing costs and supports real estate and REITs, but the USD peg limits any independent rate policy.

🛰️ Uncertainty persists: Fed Chair Jerome Powell warned of internal disagreements within the FOMC and missing U.S. data — a signal for risk aversion. Asian central banks are reacting defensively, focusing more on liquidity and investment-grade assets.

🗾 East Asia benefits: Japan’s Nikkei and Korea’s KOSPI hit new records. Funds are increasing allocations to Korea and China while trimming India and ASEAN exposure. East Asia is attracting capital — fueled by tech optimism, yen weakness, and closer U.S. ties.

Big Picture:

The key question for 2026: Can the Fed continue cutting and release more global liquidity as expected? If yes, Asia takes center stage. If not, investors will need to focus on quality, balance, and selectivity.