KUALA LUMPUR: The return of billionaire businessman Donald Trump to the US presidency will set markets to a slight positive bias with risk assets being likely to see further gains.
A win was not totally unanticipated by the market at large with assets that were linked to the “Trump Trade” having seen strong gains in the weeks leading up to the 2024 US election, although many US-media outlets still called it a tight race.
Trump mainly owns Trump Media & Technology Group Corp that’s listed on the US market. It has seen strong gains of some 180% since late-September and gains were sustained despite recently reporting third-quarter losses.
As news continued to trickle in throughout yesterday of Trump’s win of the presidency, the markets saw a stronger US dollar with the Dollar Index (DXY) gaining to a one-year high, while US bond yields also rose.
Bitcoin also soared to a record and the Dow Jones Industrial Index Futures showed a gain of 1,200 points at the time of writing.
Asian equity markets saw a mixed bag where China and Hong Kong markets jotted losses while the US’s traditional allies including India, Taiwan and Japan recording gains in their stock indices.
Markets in the Asean region were mixed with the FBM KLCI recording a 13.47 or 0.83% gain to 1,634.17 at its close.
Trump’s win is also seen to quickly stabilise and cool the geopolitical landscape and this was foreshadowed by his earlier first term.
He specifically commented in his victory speech yesterday that he would “stop wars” and noted he wanted peace in his earlier pre-election speeches.
“This is a good boost for risk assets globally. There was the time in his first term where he tried to broker peace between North Korea and South Korea and even went to the extent of cordially meeting Kim Jong Un.
“I believe he will try to resolve the Middle East conflict and the Ukraine-Russia war once he comes into power,” chief executive officer and founder of Tradeview Capital Ng Zhu Hann told StarBiz.While the DXY had seen gains immediately following Trump’s win, it is to be noted that Trump had specifically said earlier he wanted to reverse the strong dollar policy which has underpinned the US’s economic framework since the early 1990s.
The stronger dollar yesterday had also in part caused a fall in oil prices whereby Brent crude oil declined by more than 1% to US$71.15 per barrel.
It appears that the markets believe at this point that a strong US dollar is an inevitable outcome of a Trump presidency.
“The markets appear to be betting on a stronger dollar under Trump and exporters have reacted positively. Technology stocks appear to have outperformed while rubber glove companies on Bursa Malaysia have gained,” Ng said.
SPI Asset Management’s managing partner Stephen Innes said what initially looked like a tight race had now turned into a near landslide, with Trump set to secure over 300 electoral votes which is a resounding endorsement of his policy vision.
“As markets absorb the shock of his return, global financial players are sizing the impact, from the bond market’s reaction to the challenges ahead for European currencies and Asia’s trade-reliant economies,” Innes said.
Innes noted the US 10-year Treasury yields which ticked up by a modest 11 basis points is an unexpected restrained reaction and may be a sign the bond market is front-running to near perfection.
“This mild uptick reflects an underlying caution as investors weigh the likelihood of Trump’s proposed fiscal stimulus and a tax cut agenda, with the former likely facing resistance from GOP fiscal hawks in Washington.
“Despite the resounding electoral mandate, his ambitious economic policies are not guaranteed a smooth path; concerns about national debt and deficit spending remain significant obstacles within Congress,” he said.
Meanwhile, the implications of Trump’s tariff policies are sending ripples across Asia, as export-dependent economies are expected to be hit first.
“Trump’s campaign trail talk of 60% tariffs on Chinese goods is more than a hypothetical statement for Asia’s markets, especially for the Chinese yuan. Should these tariffs come to fruition, the yuan could see a sharp devaluation against the dollar, as China braces for a blow to its exports and broader trade flows,” Innes said.
“The People’s Bank of China would likely be forced into a defensive stance, intervening to stem the slide, though its options may be limited.
“This anticipated pressure on the yuan could quickly spill over into neighbouring currencies like the South Korean won and Thai baht, driving further volatility across Asia’s foreign-exchange markets as they adjust to the new tariff landscape,” he added.
Ng said it is possible that China may bear the further potential additional protectionist measures that is seen to continue from the Biden administration, although it is still a wildcard for other Asian economies including those in the Asean region if they would be as severely hit.
“Markets in the United States are celebrating a Trump win as he is expected to cut US corporate taxes and shore up the US economy.
“And when the US economy is stronger, it would be good for the global economy. But on the flip side, he is also expected to add on to trade tariffs,” Ng said.
However, other political observers noted that the US may still want to gain influence in the wider region including Asean, and thus, any further protectionist measures could potentially spare countries here.
