Big investors may be reluctant to comment publicly on their predictions for Tuesday’s poll, but the mainstream view is that a Joe Biden victory would be good for most developing countries and present opportunities which are not yet taken into account
« Emerging markets will do better with a Biden presidency, » said Charles Robertson, chief economist at Renaissance Capital, an emerging markets investment bank
He argued that the stock and bond markets had yet to consider this possibility and that large investors were still worried that they had not anticipated Donald Trump’s victory in 2016
« I don’t think anyone is really willing to bet in a big way. The shock of 2016 was so big that people don’t overwhelmingly position themselves for it because they just don’t trust the polls, » said Robertson « I think we will see a lot of money allocated to MEs in all areas, » he said in the event of Biden winning
Morning equity and bond funds reported net outflows of $ 25.8 billion and $ 9.2 billion, respectively, this year This is from Morningstar data, which covers both passive investment vehicles and assets, although sales were primarily driven by a change in risk-weighted assets related to the coronavirus pandemic
I’m not sure if Russia is the place to go if Biden wins or Turkey Countries with aggressive rhetoric and actions will not be tolerated
Although other factors had an impact, it is believed that emerging markets would have fared better without Trump Timothy Ash, analyst at BlueBay Asset Management, argued that the Trump presidency « was not good for growth of world trade ”because of the protectionist position of his administration
« EM is an indicator of global growth and a victory at Biden means more global growth and trade, » he added
In the past, the valuation of emerging market assets was often determined by the strength of the US dollar.When the greenback is weak, investors typically take money out of the US and invest it in areas such as than emerging markets, where returns on local currency stocks and US dollar bonds look better When the dollar is strong, this trend works the other way around
Gary Greenberg, head of emerging markets at Federated Hermes, said a blue wave – a clean sweep of the Presidency, House of Representatives and Senate – would result in a bigger federal stimulus package than a Trump presidency
This would not only translate into a weaker dollar, but also stronger US growth It would be another plus for emerging markets, especially for base metal exporters like Peru, South Africa and Indonesia, as well as for cyclical economies such as Chile, South Korea and Mexico, where Hermès had strengthened its positions in several countries
« With a blue wave, global confidence will strengthen US policy becomes more predictable and rational, » Greenberg added
According to Robertson, a weaker dollar caused by Biden would allow central banks in developing countries to keep interest rates low and support growth In the meantime, more predictable trade policies should give companies more confidence to invest in emerging markets
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However, Robertson also said that a blue wave could create such a huge fiscal stimulus that investors might « want to be in the US for growth » and possibly take money out of emerging markets.
Even if emerging markets retain their appeal, the impact of a Biden victory is likely to differ from country to country
« I don’t know if Russia is the right place if Biden wins, or Turkey Countries with aggressive rhetoric and actions will not be tolerated, » Greenberg said with the biggest potential impact on the stock market Russian, given that foreign investors have had oversized exposure in Moscow for some time
« It’s easy to go through the list of authoritarian states and see them all as losers: Russia, Saudi Arabia, Turkey, Brazil, » Ash said
He argued that Turkey had an « unfinished deal with Biden », who was vice president in an attempted coup against President Recep Tayyip Erdogan in 2016, which many Turks say was supported by the Obama administration
Despite this, he suggested that President Biden « would try to reset Turkey » because he is important as a potential strategic partner and wants to focus on Moscow instead.
There won’t be much slacking off with China Intellectual property theft is the central problem
« Russia is a strategic enemy of the United States, Turkey is not, it is a long-term ally, » Ash said, adding that Russia is a greater threat than China because it undermines western democracy
However, Beijing’s relationship with Washington will be by far the most important for passive emerging equity investors With Chinese equities listed in Hong Kong and the United States, the country now has a record 426% of the Widely used MSCI EM index, while Russia weighs 26 percent and Turkey just 03 percent
M Ash said that while a Biden administration would be more likely to seek multilateral support for its stance on China than if Trump remained in power, he added, « There won’t be much slacking off with China. The theft of intellectual property is the central problem «
Presidential election in the United States, 2020, Joe Biden
Global news – United States – What the American elections could mean for investments in MS