Big bubble in little China
Taiwan, Singapore, Australia, Romania, and the US.
The five things you need to know today:
TAIWAN. A currency spike suggests something’s amiss.
SINGAPORE. The electorate sticks with the party they know best.
AUSTRALIA. Economic anxiety delivers a government landslide.
ROMANIA. A first-round victory for the hard-right may cement its defeat.
UNITED STATES. The president loses the plot.
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TAIWAN. Your money or your life insurance
A currency spike suggests something’s amiss.
The New Taiwan Dollar surged as much as 5% against the greenback Monday after a record 4.5% rise on Friday. China's yuan and Malaysia's ringgit also rose on reports a currency deal was on the cards in exchange for an easing in US tariffs.
INTELLIGENCE. The spike in Asian currencies fits into Trump administration narratives about a grand bargain on tariffs. But the volatility is more likely due to local factors, such as Taiwanese life insurers, major Treasury holders, rapidly reducing their unhedged dollar exposures in the wake of last month's trade shocks. Holidays in China and Japan have also thinned trade. Taiwan’s central bank was due to hold an emergency presser at the time of writing.
FOR BUSINESS. It seems inevitable that there'll be a financial shock arising from the policy shifts in recent weeks. Sudden changes to fundamental price structures (including oil, thanks to OPEC+ production hikes) can have an outsized effect on the unhedged and under-regulated. It’s too early to know if Taiwanese insurers will be the source of a new financial crisis, but Asian markets, the source of previous global contagion, have many firms in this category.
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SINGAPORE. Strait and narrow
The electorate sticks with the party they know best.
The People's Action Party won its 14th consecutive election Saturday, increasing its seats to 87 of 97. Prime Minister Lawrence Wong said the emphatic result meant Singapore would be "in a better position to face this turbulent world.”
INTELLIGENCE. The PAP’s victory wasn't in doubt, but its increased margin, after a difficult transition from the Lee family and a rare corruption scandal, is a relief for Wong. He can thank Donald Trump, noting the global flight to safety among investors and voters alike (in Singapore, a wealthy financial centre, they are often the same thing). He now faces the task of not just navigating a potential trade war, but a regional slowdown and rising strategic tensions.
FOR BUSINESS. A trading entrepot, Singapore does well when the world does well. But as a wealth management hub, it also does well when the world is in crisis and investors seek a safe harbour. How that truism holds should the US and China force smaller powers to choose their allegiance will be on Wong’s mind. Singapore is a major domicile for Chinese in- and outbound capital. Yet it hosts the US Navy, flies US F-35 jets, and is a major US ally in all but name.
AUSTRALIA. Worries, mate
Economic anxiety delivers a government landslide.
The Australian dollar hit a five-month high Monday after the centre-left Labor Party increased its parliamentary majority from 77 to 86 seats of 150 in a surprise result Saturday. Opposition leader Peter Dutton lost his job and his electorate.
INTELLIGENCE. Labor was not especially popular, and until late last year the opposition Liberal-National coalition was seen as the election's likely winner, but worries about an erratic world and a disciplined campaign not only helped Labor to survive into a second term, but to completely dominate the lower house. Opposition and crossbench seats in the Senate will force it to moderate legislation, but this represents a rare moment of stability in Australian politics.
FOR BUSINESS. As in Canada the week before, the swing to incumbency has been attributed to Trump, yet Labor also ran a better campaign. While both sides ran on cost-of-living issues, Labor was firmly focused on house prices, whereas the LNP focused on everything from petrol to electricity. For the first time in Australia, Gen Z and Millennials are the biggest voting cohort. Like peers elsewhere, they're less likely to drive, own homes or dismiss climate change.
ROMANIA. Dan’s card is fool
A first-round victory for the hard-right may cement its defeat.
The hard right’s George Simion won 41% of the first round of Romania's re-run presidential vote Sunday, with Bucharest mayor Nicusor Dan coming second at 21%. Simion vowed to give banned politician Calin Georgescu a leadership role.
INTELLIGENCE. Simion, a revanchist Eurosceptic who is friendly with the Trumps and sees Moldova as part of Romania, was always a dark horse to watch, but until now has remained largely on the political fringe. Dan, by contrast, is a centrist mathematician who appeals to a broad swathe of voters and can be expected to mop up most votes that didn't go to Simion, as well as those of many of the 48% of voters who didn’t participate in the first round.
FOR BUSINESS. Simion's promise to give Georgescu a job, should he win the next round, will energise the right-wing rural base but could alienate mainstream voters, including in the diaspora. The EU and Romania's government arguably overreached by annulling the late-2024 first round election and banning Georgescu on account of his alleged Russian links, but Georgescu was and is a discredited conspiracy theorist with lessening appeal in uncertain times.
UNITED STATES. Hollywood ending
The president loses the plot.
Donald Trump announced 100% tariffs on foreign films Sunday, saying they were "a national security threat" and "messaging and propaganda". Cardinal Timothy Dolan said Trump's posting of a photo of himself as pope "wasn't good".
INTELLIGENCE. Many will treat Trump’s latest as culture war "flooding the zone" tactics, but proposed services tariffs are new, and how they’re calculated could invite lawsuits and disruption. Few films are purely American or foreign. A globalised industry, Hollywood would suffer under the proposal. This may be the intention of Trump and his industry advisers, Jon Voight, Sylvester Stallone and Mel Gibson, but it won't be welcomed by today's stars or producers.
FOR BUSINESS. Around half the cost of US production is spent overseas. The success of US firms such as Netflix is reliant on this model, which involves tax incentives, local specialisms and overseas locations. But the implications go beyond film and television. US services comprise 77% of GDP and produce an estimated $293 billion surplus seen as vulnerable to foreign retaliation. Australia and New Zealand vowed Monday to stand up for their film industries.
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Best,
Michael Feller, Chief Strategist