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PETALING JAYA: Global equity markets are becoming increasingly erratic ahead of the US presidential election, where initial polls favored Democrat Joe Biden over incumbent President Donald Trump.
With the elections topping the list of major events this month, investors are repositioning themselves to be less affected by any outcome, while some have chosen not to participate in the market.
The major indices, including the FBM KLCI, had been extremely volatile in recent days. The FBM KLCI lost 14.76 points in yesterday’s trading, only to recoup most of its losses to close at 1,466.46, or a 0.43 point drop from bottom fishing in the second half.
Hong Kong’s Hang Seng Index fell 227.35 points in the morning, only to finish 352.59 points higher at 24,460.01 points, while Japan’s Nikkei 225 was down 198.69 points and finally added 318.35 points to 23,295. , 48 points at closing.
Rakuten Trade Sdn Bhd Research Vice President Vincent Lau said markets would eventually rise regardless of a Trump or Biden victory, adding that historically there were not many differences between Democrats or Republicans in power.
“In terms of perception, if Trump loses, then our market will fall, but I think that is not that per se. If it’s a Biden win, there may be a bit of a shock in the United States and our markets, but they will rebound and rise.
“Biden is ahead in the initial polls and if you look at the markets, they are already assessing a Biden win, more or less,” he said.
If Trump loses, it will be the first time a sitting president has failed to win re-election since 1992, when George HW Bush lost to Bill Clinton.
Biden, who was recently criticized for accusations that he wanted to ban fracking, only to say it wasn’t his policy, is pro-green energy, while Trump has always been pro-tech.
Either way, the president will do what’s best for the country. I don’t think they want to end fracking, so it will be balanced.
“There will always be a lot of rhetoric in your debates but at the end of the day common sense will prevail. So it’s not as bad as it sounds, ”Lau said.
One analyst said Bursa Malaysia is likely to experience its most volatile trading week with a large flow of major events starting today, where Bank Negara’s monetary policy committee decides the direction of the overnight policy rate.
“Most likely it will remain at 1.75% because it is premature to deduct the impact after the moratorium to justify further monetary relaxation.
“The presidential election follows after this, the meeting of the US Federal Open Market Committee and, finally, the presentation of the 2021 Budget on Friday.
“Investors are likely to be conservative this week as they expect more clarity,” he said.
Maybank Kim Eng Research said that since Biden is the favorite to win the election, the US energy landscape is expected to change.
Biden proposed a $ 2 trillion plan, which puts the US on the path to zero carbon pollution from the electrical system by 2035 and net zero emissions by 2050.
“The clear winners are renewables, the losers are the US oil and gas (O&G) ecosystem.
“The policy change will have a ripple effect across all regions, energy and commodity verticals given the global importance of the United States,” he said in a report yesterday.
The research house said US oil majors such as Exxon Mobil and Chevron may come under pressure to accelerate divestment of O&G assets in Asia-Pacific, posing a positive M&A risk for Southeast E&P players. Asian as Petroliam Nasional Bhd. PTTEP from Thailand and Pertamina from Indonesia.
He added that there was a big gap between the US demand for solar panels and its domestic manufacturing capacity, which was a positive for solar manufacturers.
China currently holds 70% of the world’s photovoltaic (PV) manufacturing capacity, followed by South Korea, Taiwan, India and Malaysia.
While conflict will remain a dominant issue for Sino-U.S. Relations under Biden, INSEAD Professor of Strategy and International Business Michael A. Witt said the Biden administration is likely to return to a less contentious foreign policy, in front of the allies.
Rather than antagonize them, President Biden is likely to seek to re-engage them to build a coalition that supports America’s goals.
“For Asean, this should bring benefits. For example, the United States can offer a free trade agreement and enhanced military cooperation to its partners in the region.
“In this context, there is the possibility that the ASEan countries will pit China and the United States against each other to obtain greater benefits for themselves,” he said.
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