US Presidential Election 2020: How The Results Will Impact Asia | Insight | Full Episode
Asian analysts share their predictions for the US elections
CNBC asked thirty market strategists a series of questions about the US election and related investment strategies, offering anonymity in exchange for their opinions. All respondents live in the Asia-Pacific region.
CNBC emailed early last week and then contacted strategists to ask if they changed their minds following the first presidential debate and news that the president Donald Trump tested positive for coronavirus. Three out of thirty respondents changed their predictions on election results.
Who will win in 2020?
Asian investors are divided over a central political issue. Twelve analysts predict victory for former vice president Joe Biden, eleven predicted contesting election results, and seven bet on Trump to win.
«This news (diagnosis) adds some uncertainty, and Biden added a little, according to forecasters, – one of the analysts commented via e-mail. – But there is still too much unknown to expect changes».
What strategies will work during the voting?
The vast majority of market analysts polled by CNBC are going into the cash and buying relatively safe assets like gold ahead of the November 3 vote. Nineteen of the thirty strategists said they are increasing their cash holdings, including the US dollar and Japanese yen, and are also investing in gold and US Treasuries..
Ten strategists believe now is a good time to move away from high-priced stocks, such as technology stocks, to less popular sectors. These include the travel and tourism sector, as well as stocks that track the economy as a whole, including banks and industrial enterprises. Another investment strategy that was presented is buying more «protective» assets such as healthcare stocks, consumer stocks and dividend stocks.
Only one of the market participants surveyed by CNBC sees a prospect in alternative investments, including real estate investment funds (REITs), infrastructure bonds, or the much-talked about ESG funds that take environmental, social and governance factors into account in their structure..
Chinese technology versus American technology
When asked what is more attractive to them: US technology stocks or Chinese tech companies, a confident majority – eighteen out of thirty Asian analysts – named Chinese companies as their preferred choice..
«Asian technology is cheaper than US, less risk of tradable options, and less regulatory risk», – said one of them, explaining that speculative options trading associated with representatives of the American technology sector makes them more volatile than their Asian counterparts.
Another strategist said that «Biden’s victory could subject American technology to stricter regulation».
IPO Markets in Hong Kong, Mainland China and South Korea have generated a lot of investor interest in 2020, and «this interest will only grow», – said another respondent.
According to another analyst, the planned initial public offering of Chinese financial technology company Ant Group «will cause an upward revaluation in technology» in Asia. Ant Group, a subsidiary of Alibaba that is still controlled by the founder of Alibaba Jack Ma, operates the hugely popular mobile payment app Alipay in China.
Asian Markets Prospects
Sixteen market experts said they were optimistic about the Asian markets despite short-term volatility. These respondents said they believed Asia will have more room for growth when the risk factor of the upcoming elections is eliminated given the apparent disappearance of the coronavirus in Asia and signs of economic recovery..
«We are constructive about the 2021 outlook and expect Asian markets to eventually recover if we see volatility in the next couple of months in the wake of the US elections.», – said one of the strategists.
«That said, the strategist continued, “Asian stocks are likely to outperform US stocks in the near future, especially if Biden wins the election. This could put pressure on US equities, but is likely to have limited direct fundamental impact on Asian equities.».
Biden vs. Trump: Which Countries Win?
The strategists said that Biden’s victory would be most positive for China, Japan and South Korea, while Trump’s victory would be beneficial for India, Vietnam, the Philippines, as well as Taiwan..
Biden is expected to take a more moderate approach to China as president, while Trump’s re-election will be seen as strengthening India’s position to counterbalance Chinese dominance..
«India always needs a common enemy for political ends, and recent squabbles with Pakistan and China have been politically popular, said one analyst. – In continuation of this, Trump’s blessing has only strengthened the position of the Prime Minister of India Narendra Modi. Taiwan will also find more U.S. support under Trump – this is the red line for China and Trump knows when to push that button.».
But President Biden’s moderate tone toward China may not ease tensions between the world’s two largest economies..
«Democrats have given no indication that it will be easier for them with China than with the Republican Party», – said one of the participants.
This sentiment emerged clearly among all respondents when asked what Biden’s presidency would mean for US-China relations. Even under Biden, tensions with China will persist because, as one said, «all foreign policy, defense and intelligence in the United States is against China».
However, most analysts said Trump’s second term could heighten tensions over Hong Kong, human rights and the Covid-19 pandemic. And economic «delimitation» between the two countries remains on the agenda.