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HONG KONG/SINGAPORE, Nov 29 (Reuters) - Asian markets have steadied after two weeks of heavy losses in which investors rushed funds out of the region as they repositioned for a Trump presidency, but these markets remain vulnerable to further sharp capital outflows.
The dollar has given up some gains after it climbed more than 6 percent in the last two weeks against a trade-weighted basket of currencies, while Asian stocks have found their feet after heavy losses.
Analysts warn, however, that the calm may be temporary.
"It is too early to say whether the worst is over for Asian markets," said Santitarn Sathirathai, an economist at Credit Suisse based in Singapore. "A further dollar rally or a hawkish Fed may trigger more outflows."
Emerging securities markets lost more than $16 billion and their currencies fell hard in the first two weeks following Trump's election, highlighting the vulnerability of this trade-dependent region.
November official foreign exchange reserves data for most Asia-Pacific countries including China, South Korea and Taiwan, will be published next week.
Central banks have intervened by selling foreign currencies to stem losses in their own currencies, and that could show up as a fall in foreign exchange reserves, with China thought to be among those selling dollars.
Stock markets from Hong Kong to India have seen large outflows, and there has been heavy selling of Korean and Malaysian debt as investors assess the impact of Trump's win on the region and where the best returns now are.
Asia has benefited handsomely since the global financial crisis as major central banks have flooded markets with cheap stimulus cash, but as the U.S. approaches more normal monetary policy, risk aversion may return.
The immediate impact of Trump's election was for some of that stimulus money to head home as investors decided his spending plans could spark some growth and inflation in the United States, raising expectations for a quickening of the Federal Reserve's tightening cycle.
That view saw U.S. Treasury yields surge, lifting the dollar and sharply eroding Asia's yield differential, which is needed to reward investors for the extra risk they take. On Friday, 10-year U.S. Treasury yields rose to 2.417 percent, their highest since last July, up more than half a percentage point in roughly two weeks.
A Bank of Merrill Lynch survey of fund managers conducted in the week after the U.S. elections shows a steep drop in emerging market allocations to a net 4 percent overweight from 31 percent before, its biggest drop in five years.
In the two weeks ending Nov. 23, about $6.2 billion had left Asian equity markets while emerging market bond funds, including Asia, have seen outflows of $9.6 billion in the last three weeks, according to a Jefferies analysis of EPFR Global data.
"From now, some of the adjustments that need to take place within each of the Asian economies is the natural progression, to digest away some of the excesses," said Ng Kheng Siang, head of Asia Pacific fixed income at State Street Global Advisors.
India saw outflows of $430 million from its bond markets in the month to Nov. 23 and Korea has lost more than $1.4 billion so far this month, according to exchange data.
Malaysia has been among the hardest hit, with its ringgit currency declining more than 5 percent in the last two weeks, forcing the central bank to take steps to protect the currency.
"We'll probably sit tight for the time being before becoming more constructive in the more emerging parts of the world at this point," said John Doyle, chief investment officer for multi-asset and equity strategies at UOB Asset Management.
Reporting by Saikat Chatterjee and Nichola Saminather; Additional reporting by Jong Woo Cheon in Singapore and Vikram Subhedar in London; Editing by Eric Meijer