Summary:
- Potential increase in Asian market volatility.
- Likely rise in dollar if a Republican administration takes office.
- Taiwan dollar, Chinese yuan, and Mexican peso at risk.
They believe this could lead to increased pressure across various areas, including broad China stock indices, shares of Korean battery manufacturers, and potential volatility in regional currencies, possibly resulting in a stronger dollar. Moreover, if Biden exits the race without promptly naming a successor, short-term volatility could escalate.
“If Biden withdraws, it could bolster Trump’s standing,” remarked Manish Bhargava, a fund manager at Straits Investment Holdings in Singapore. “This scenario is likely to have a negative impact on Asian equities, especially those tied to China.”
While former President Donald Trump’s popularity in polls is climbing, Biden’s hold on the Democratic presidential nomination seems uncertain. Prediction markets on Thursday indicated Vice President Kamala Harris as more likely than Biden to win the election, though Trump remains the frontrunner.
Biden is increasingly pressured to consider ending his presidential campaign. Investors globally anticipate that a Republican administration would implement policies favoring tariffs, immigration restrictions, and deficit reduction. This is expected to strengthen the dollar, increase bond yields, and benefit sectors such as banking, healthcare, and energy in the US equity markets. Currencies abroad, including the Taiwan dollar, Chinese yuan, and Mexican peso, are perceived as particularly susceptible to these changes.
According to Takeshi Ueno, senior economist at Nissay Research Institute, and Teppei Ino, Tokyo head of global markets research at MUFG Bank Ltd., traders who support a return of Trump to the White House do not view a potential candidacy by Harris as a cause for concern.
“If Vice President Harris becomes the presidential candidate, I don’t believe it will alter Trump’s dominance,” said Ino. “In such a scenario, the Trump trade is expected to persist.”
However, Trump’s critique of the yen and yuan’s current weakness might limit downward pressure on those currencies, even as his potential victory is seen bolstering the dollar broadly, he added.
Trump’s plans on Taxes, Tariffs, the Fed, and more
Market reactions, whether tumultuous or stable, may hinge on whether a successor is swiftly named to the Democratic ticket should Biden withdraw, according to market participants.
Source:
Bloomberg
