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Tue, November 03, 2020 – 3:09 PM
A VICTORY by Democratic candidate Joe Biden over President Donald Trump in the US election will be seen as positive for Asian stocks, DBS Group Research said Tuesday.
In a monthly strategy report, the research team noted that Biden is likely to end the United States’ trade war with the EU and take a more open and negotiable approach with China with reconsideration or removal of tariffs.
This would be positive for Asia and especially Singapore, given the small and open economy of the city-state, wrote analysts Yeo Kee Yan, Chung Wei Le and Janice Chua.
Companies that have production facilities in China and sales exposure to the US are some that are poised to benefit from a Biden win, DBS analysts said, citing Valuetronics and Hi-P as companies that They are listed in Singapore with a 30-50 percent revenue exposure. To the US
The easing of trade tensions between the United States and China will also be positive for China’s recovery and should raise confidence in China-related stocks on the Singapore exchange, such as China Aviation Oil (CAO) and Hutchison Port Holdings Trust (HPHT). ), the analysts added.
They noted that the CAO gets between 60 and 65 percent of profits from aviation fuel services from Shanghai International Airport, which will benefit from a strong rebound in domestic air travel. Meanwhile, HPHT derives about 90 percent of its profits from the port of Yantian, where 30 percent of the business is exports to the US.
DBS is not alone in seeing the positive impact on Asian stocks from a Biden win.
Bloomberg reported Tuesday that BlackRock had improved stocks in Asia, excluding Japan and emerging markets, to overweight expectations of a Democratic sweep, also known as the Blue Wave, where Biden wins the election and Democrats take both houses of Congress. BlackRock also cited the greater success of Asian economies in controlling the Covid-19 outbreak compared to the West, by increasing its demand for regional stocks.
Similarly, JPMorgan & Co said last Friday that an overweight to emerging Asian equities and currencies was the safest trade for the polls, provided investors believe Biden will win.
DBS analysts said in their research note Tuesday that a Blue Wave would be an advantage and preferred as it should lead to the smooth passage of a second US fiscal stimulus.
On the other hand, if Trump wins a second term, there may be more uncertainty, analysts noted. They pointed to the risks of worsening trade tensions between the United States and China and the acceleration of manufacturing relocations outside of China.
DBS believes that one of the main beneficiaries of a second term for Trump is oil and gas players with exposure in the United States.
Another term for the president may be positive for Singapore-listed oil service providers in the U.S., such as CSE Global, the research team said, adding that Keppel Corp could see increased demand for rigs and vessels with a deregulation of the energy industry and an elevator for drilling activities.
Analysts urged investors to stay focused on the positives of the Singapore market, beyond short-term weakness amid lockdowns in Europe and growing cases of Covid-19 in the United States. They said the current market sell-off will likely end above March lows, with technical support for the Straits Times index at 2,380 and 2,300 points.
“Asia is in recovery, led by China,” the analysts wrote, adding that Singapore’s gross domestic product has also passed its inflection point and is forecast to post positive year-on-year growth in 2021.
And for travel stocks, “it’s not all doom and gloom” either, DBS said, as investors can look to developments in candidate vaccines, which are undergoing clinical trials and should know their results in late November through early November. December.
“A positive result will likely mark a recovery from the major lows for travel-related stocks,” analysts said.
“The Singapore government’s commitment to restoring air connectivity while protecting against Covid-19 will position our aviation and hospitality stocks as the first to take advantage of the recovery in international travel once a vaccine is available.”
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