Key Takeaway: Moody's downgraded Southern Water to junk status , citing financial and operational underperformance, compounding the broader issues facing the UK water sector. Southern Water Ltd’s credit rating was downgraded to junk by Moody’s , with a warning of potential further cuts due to its weak performance history and financial challenges. This downgrade impacts the company’s ability to raise the £4 billion in new debt and £650 million in equity required for its capital plans. The UK water industry is facing heightened scrutiny due to concerns over chronic leaks, sewage spills, and high-interest rates. Southern Water, which supplies over two million people in England, could face severe penalties from the regulator Ofwat , which may limit funds for essential upgrades. Following the downgrade, Southern Water’s 2026 bonds dropped 2.7 pence to around 85 pence on the pound. Despite the rating cut, Southern Water assured customers that services would continue unaffected, hig
Key Takeaway: The Thai baht is set to be one of the most vulnerable emerging Asian currencies under a Trump second term, primarily due to Thailand's high reliance on trade and a strong connection to the Chinese yuan.
As Donald Trump potentially returns to the White House, the Thai baht faces a turbulent path ahead. Thailand’s dependence on trade, especially with major partners China and the US, could expose the currency to volatility if Trump reintroduces tariffs and protectionist policies. Data from 2018, when similar policies were enacted, signals choppy months for the baht, with risks tied to its overvalued trade-weighted status and close correlation to the US dollar and yuan.
Meanwhile, the Philippine peso and Indian rupee show greater resilience, with low correlation to the dollar and limited impact from Trump's policies, allowing them to better withstand any renewed trade tensions.
Four Key Factors Influencing Asian Currencies:
- Trade Valuation ImpactThailand's baht remains 1.5% above its 10-year average in real effective exchange rate (REER), potentially hurting trade competitiveness. With 129% of GDP tied to trade, Thailand's economy is highly sensitive to shifts in US import policies.
- Dollar CorrelationThe baht’s negative correlation with the dollar means that a stronger dollar could weaken it further. In contrast, the peso and rupee, with their lower dollar correlation, could fare better.
- Increased Volatility RisksEmerging-market currencies saw heightened volatility post-2018 when Trump introduced tariffs, a pattern likely to repeat if similar policies are implemented. Asian EM currencies may again face greater fluctuations as policies are detailed.
- Correlation with the Chinese YuanThe baht and ringgit are highly correlated with the yuan, which may hurt them if US-China tensions escalate. The peso, rupee, and won have shown lower sensitivity to yuan movements, positioning them as potentially more stable.
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