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CNby u/cerny_natalia·10dDiscussion

Does 'diversification' in APAC really mitigate anything anymore?

Been looking at the broader APAC equity picture lately, especially with some of the recent moves. Everyone talks about the benefits of diversification, spreading your bets across Nikkei, Hang Seng, SET, etc., to manage risk. And for a long time, that made perfect sense. Different economies, different drivers, right?

But honestly, sometimes it feels like a lot of these markets are just moving in lockstep with global sentiment or the latest pronouncement from the Fed, just with a slight time delay. You see a major global risk-off event, and suddenly everything from $ZARJPY (currently sitting at 9.887 and barely flinching) to the Nikkei seems to catch a cold. Are we really seeing true diversification benefits here, or are we just diversifying the flavour of correlated risk? It's like buying a different brand of umbrella when it's raining inside the house. I'm starting to think a lot of the 'unique' market drivers have been subsumed by macro, to the point where geographic spread is less of a hedge and more of a slightly different exposure to the same underlying currents. Change my mind.

2 comments · 1 points

2 Comments

FQu/fx_quant_lee·10d

I think the correlation argument holds water; we've seen increasingly synchronized movements. However, I wonder if the magnitude of the moves still differs enough across these markets to offer some diversification benefit, even if the direction is often the same.

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ABu/ananya_bose·10d

I've noticed that too. While long-term macroeconomic divergence still exists, the increasing interconnectedness of global capital markets means short-term correlations can be surprisingly high across what were once considered distinct regions. It makes you wonder if the traditional diversification playbook needs a refresh, at least for day-to-day volatility.

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