We will be updating this live reaction piece as comment comes in from investors across Asia. Responses are coming in thick and fast as Donald Trump pulls off a shock victory.
Asia’s iTraxx investment grade index was around 5bp wider on Wednesday afternoon, according to market data, although one banker said his firm was quoting it 10bp wider. The news has pushed Asian bond investors to the sidelines, creating what one banker called “an offer-only” bond market.
6.13pm: Christophe Bernard, chief strategist at Vontobel Asset Management:
"Everything else being equal, the [economic consequences of a Trump win will be] intention to renegotiate key trade agreements and impose trade barriers on Mexican and Chinese imports. This is introducing a high level of uncertainty and might weigh on global economic growth. Likewise, though unrealistic, sharp tax cuts and infrastructure spending would push up the budget deficit. At the margin, such policies should stoke inflation.
"Clearly, in a close analogy to Brexit, there is a widespread disenchantment across western democracies with existing policies. Anti-establishment parties in Europe should not be underestimated as French and German elections are scheduled for 2017. These social and political developments are imperfectly captured by polling institutes."
David Kelly, chief strategist, JP Morgan Asset Management:
"The knee-jerk reaction of investors to last night’s election was to sell U.S. and global stocks and buy Treasury bonds. However, in the medium term, a warming economy, further stoked by expansionary fiscal policy could favor the former over the latter.
"In the long-run, investors would do well to make sure that they are well diversified outside of U.S. stocks and bonds and that they have sufficient exposure to alternatives and international securities."
6.12pm: Asia's bond markets are set to slam shut as the world digests the impact of Trump.
5.51pm: Alicia Garcia Herrero, chief economist Asia-Pacific, Natixis:
"Even if part of Trump's aggressiveness gets ironed out once he becomes president, there are two main traits that are bound to remain in the economic policies he will be conducting. The first is protectionism, the second more interference in Fed affairs, in particular monetary policy.
"In a nutshell, and abstracting from a much higher geopolitical risk for China which could actually overrule any positive economic impact, the reality is that, economically speaking, Trump might not be such horrible news for China after all."
5.25pm: Markus Schomer, chief economist at PineBridge Investments
"When it comes to monetary policy, in the short term, it looks like a December rate hike is off the table. Longer term, I don’t think we will see major personnel changes at the Federal Reserve. Trump criticized Chair Janet Yellen during the campaign, but she is not likely to resign. However, Trump could appoint two board members, which could have some impact on the conduct of monetary policy."
Homin Lee, Asia regional economist at Lombard Odier
The macroeconomic implications [of Donald Trump’s election to be the next US president] are threefold. Market’s immediate focus will be Mr. Trump’s stance on Janet Yellen’s leadership of the Federal Reserve and the two vacancies on the Fed’s Board. Mr. Trump’s aggressive rhetoric on the Fed’s policy and the general populist backlash that propelled him to victory ensures that the Fed’s political room to maneuver will be very small in the coming months, especially with high uncertainties about how Mr. Trump translates the popular will on the Fed’s mandate.
Second, fiscal policy will be more pro-cyclical since tax cuts Mr. Trump has promised are a unifying issue for the Republican leadership, and he needs a bargaining chip for some of the more anti-business measures he has promised to voters. All of these increase the chance of materially pro-cyclical policy and higher volatility for US rates.
Third, on the issue of immigration, more substantial measures on the deportation of undocumented immigrants and various visa programs seem quite likely due to their strong appeal to Mr. Trump’s core support base. This increases the risk on the margin that the wage pressures in the US are slightly higher than the trajectory that has been assumed by economists and investors until now.
Markets’ response clearly indicates that the election outcome is seen as challenging for global growth and conducive to long-term economic challenges in key developed markets. We believe that the near-term uncertainties surrounding his policies, many of which are specifically targeted to key emerging markets (for obvious political appeal), might require higher premiums from emerging market assets that face both trade and currency risks.
- Earlier this year, writers looked ahead to the possible impact of a Trump presidency on trade in Asia. The verdict was that, while unpopular in much of the region, it might be good for China.
5.17pm: Tom Orlik, chief Asia economist and Fielding Chen, Asia economist for Bloomberg Intelligence.
"The consequences for Asia from Donald Trump's US presidential election win are far-reaching. The Asian growth miracle is underwritten by the free flow of trade and the US security guarantee. Both now appear uncertain. Trump's campaign promises suggest sweeping tariffs on imports from China, and a greater reliance on Japan and Korea policing their own affairs. A blow to exports would take a chunk out of growth for countries across the region. Heightened security tensions would further cloud the outlook."
5.09pm: While markets tumble, distressed debt investors expect the Trump victory to open up fresh opportunities.
4.50pm: James Cheo, investment strategist, Bank of Singapore.
"A Trump win represents more market uncertainty. Tactically, investors should adopt a more defensive tilt to asset allocation, by de-risking further – with a preference of credit over equities. This would give investors the flexibility to add risk, after there is more US policy clarity."
Mark Haefele, global CIO, UBS Wealth Management.
"Given Trump's limited background in politics, markets will look toward his appointments for top administrative posts for clues about his policy agenda. The result underlines again the importance of investment diversification, both in terms of regions and asset classes."
4.47pm: Léon Cornelissen, chief economist at Robeco:
“It’s an historic day – the biggest political upset in American history. Understandably markets are very worried. Basically there’s been a rush towards safe havens such as gold and the Japanese yen. On markets, we should also reckon with forced selling – investors who have to liquidate their positions under these sort of circumstances – which is likely to send asset prices down further.”
Research team at Lombard Odier, a Swiss private bank:
"Markets’ response clearly indicates that the election outcome is seen as challenging for global growth and conducive to long-term economic challenges in key developed markets. While the clarification of Mr. Trump’s economic policy might be more supportive for the performance of risky assets in the medium term, we believe that the near-term uncertainties surrounding his policies, many of which are specifically targeted to key emerging markets (for obvious political appeal), might require higher premiums from emerging market assets that face both trade and currency risks. With this new view of a far more volatile path that we expect for global policy following this election, we decided to trim our tactical overweight in emerging Asian equities that might be at risk. We will continue to monitor the new policy communication from the Trump team for clues on how they will tackle this perception in the market."
4.41pm: William Ma, chief investment officer, Noah Holdings
"There will be more policy uncertainly, and that would create opportunities for Macro manager and less favourable for relative value managers. We expect global allocators will be less risk-off compared to before election, and money will flow from US and Europe to Asia when investors look for growth opportunities."
Dominic Rossi, global chief investment officer, equities at Fidelity International:
“The immediate sense of bewilderment at the shift rightwards in American politics will need to give way to a more sober risk assessment.
"The immediate impact will be on the Fed. The probability of a hike in interest rates in Dec, followed by two further hikes 2017, has fallen sharply. The dollar which has been trending higher in anticipation, has consequently reversed. Both were threats to the bull market, and these have now been postponed. Monetary policy will remain accommodative."
Bilal Hafeez, Nomura’s head of EMEA fixed income research:
“The possibility of the Fed continuing to hike, a fiscal stimulus package which could boost growth in the short-term, and some kind of tax amnesty [for US companies holding funds overseas] … all of this could be a real boost to the dollar. The emerging market picture is much less clear cut from here onwards.”
Tuan Huynh, chief investment officer, APAC, Deutsche Bank Wealth Management
" As with any changes to incumbency, there is likely to be increased volatility in markets as investors in Asia await further clarify on policies. There is likely to be risk off at least over the next three months, due to increased uncertainty. EM assets may be vulnerable near-term.
"One key risk is US-China relations. A Trump administration brings more uncertainty to cross-Pacific relations. Given these, we continue to like fixed income over equities in Asia. We believe that there is increased likelihood that some Asia central banks (in particular Indonesia, Malaysia, India, China) will look to take a more dovish view on monetary policy."
Eric Lonergan, multi-asset portfolio manager at M&G Investments:
"The critical unknown is whether a Trump presidency pursues the policies of Trump the candidate, in particular his anti-trade, anti-China and anti-Mexico policies. Reason suggests that Congress and financial markets will regulate his ability to act. It is equally possible that these campaign rally cries are abandoned with the responsibility of power. But the real concern is that he will do what he says."
4.17pm: Wang Hanfeng, chief strategist, CICC
"Trump’s victory might not be all that bad for China. Under the Trump administration, The US is unlikely to join the Trans-Pacific Partnership trade deal, implying less pressure for China in Asia-Pacific. Trump’s protective trade policy suggests he will focus more on internal issues, thereby giving China more flexibility on its regional One Belt One Road initiative."
Stephen Innes, senior trader at Oanda.
“I would be stating the obvious if I said we were entering uncertain times. Regionally, Tump's threat of trade protectionism and trade barriers is real and could be a huge concern for Multinational 's operating in the region, but I see that as longer term implication whereas the state of the currency market a current issue. Given the sheer volumes of Asset rotation from Developed Markets into Emerging Market this year, one can only expect some negative regional currency implication as investors reduce exposure in APAC
"The issue in today's market is liquidity, which was running a bit sparse, and market moves might have been amplified. I suspect the prudent move before diving in would be to let the dust settle and reevaluate this Brave New World once both European and US investors come to market.
"I 'm very doubtful that Trump will follow through on his Trade threats as inevitably cooler heads would prevail and realise this type of protectionist move would not only negatively affect China but would hurt the global economy."
Daniel Morris, Senior Investment Strategist, BNP Paribas Investment Partners (London)
“Trump’s rhetoric is perceived as aggressive towards China and the value of the Rmb, then markets could anticipate the beginning of a trade war. This would be negative not only for the US but globally. There are also questions about Janet Yellin's tenure as Fed president, and whether her replacement might be more hawkish.
“And finally, while Trump had discussed increasing spending and cutting taxes, these plans did not appear to be offset by spending cuts elsewhere, raising worries about the US deficit and Treasury yields.”
“As he would not become president until January, there is the potential for a sustained period of uncertainty.”
4.13pm: Mark Wills, managing director of State Street Global Advisors and head of the investment solutions group, Asia Pacific:
"A Trump victory is a bad result for trade and emerging markets. The Fed is also likely to be on hold in Dec. The Austrian presidential election and the Italian referendum are now the next hurdle for global markets. Risk assets hate uncertainty and the Trump victory brings more uncertainty to both financial and economic decision makers."
Flavia Cheong, head of equities Asia Pacific ex-Japan, Aberdeen Asset Management:
“Donald Trump is a controversial choice for president who may prove to be a volatile and unpredictable US leader. His speeches so far have lacked any policy details and that makes it very difficult to anticipate what he will do next.
"Over the long run, Trump-inspired protectionism might force Asian countries to accelerate their efforts to shift from export-led growth models to more consumption-based models. If so, he may do the region a favour. For example, China would finally have the catalyst it needs to fully embrace the painful structural overhaul it has promised.
"This could end up benefiting our regional holdings because, as our clients will know, the majority of our investments are in businesses that are set to take advantage of growing domestic consumption.”
4.05pm: Valentijn van Nieuwenhuijzen, head of Multi Asset at NN Investment Partners
Key will now be whether or not Trump will prove to be a populist or a pragmatic president. Still, even a more pragmatic approach will only become visible after some time and the near-term outlook is therefore clouded with (geo-)political uncertainty."
Mark Burgess, CIO EMEA and global head of equities, Columbia Threadneedle Investments
"For the first time a businessman with little political experience has won the US presidential election and we expect the impact of the result on equity markets to be mixed, with an initial short-term hit as the world adjusts to the perceived increase in geopolitical and economic risk.. Longer-term, the obvious winners will be infrastructure, with a focus on roads, bridges, airports and sectors that would benefit from M&A and industry consolidation, which Trump is particularly enthusiastic about. Financials will benefit from loosening of the Dodd-Frank regulations, while the defence sector is likely to thrive.
"Trade protectionism is perhaps the biggest economic fear, as we could see stagflationary outcomes and a real risk to emerging markets, in particular Mexico and China. "
Daragh Maher, David Bloom and Paul Mackel, FX analysts at HSBC
"Donald Trump is close to a ‘clean sweep’ Republican victory. This would be a major risk-off event for FX markets. The initial wave would see further aggressive MXN and EM FX selling. EUR, JPY, CHF and gold would likely rally further. The medium-term implications will hinge on the actual scale and nature of policy implementation."
"Safe havens such as the JPY and CHF would also remain supported in the medium-term despite likely policy push back from the BoJ / MoF and SNB who will try and stem their respective strength."
3.58pm: Wu Zongying, vice chief investment officer of Taiwan’s Yuanta Securities Investment Trust Company
"Trump’s protectionism is negative to multi-national corporations and will raise the operational costs of corporate, so we hold a negative view on US equities. Investors are expected to buy US Treasuries for hedging in short term, but as Trump tends to increase public expenditures, the USTreasury yield will eventually go up, so we are conservative on the performance of US Treasury in the long run.
"The US and global equity markets will have an obvious correction in short term, but will return to fundamentals. The near-term volatility provides a good timing to add positions. We recommend equity-bond balanced funds that invest in China and Asean markets and Indonesian government bonds."
3.56pm: TRUMP SPEAKS, MAKES CALL FOR RECONCILIATION AFTER CLINTON CONCEDES
3.36pm: Saker Nusseibeh, chief executive, Hermes Investment Management
"Since the introduction of fiat currencies, governments rely on their reputation as a measure of trustworthiness in order to reduce their risk premium in capital markets. Given Trump’s unusual campaign, it is not a stretch to imagine him repeating his campaign talk of renegotiating US debt. Although everyone knows such an outcome is highly improbable, a President mentioning the idea might lead to serious volatility in US Treasury markets and increase risk premia for US assets."
3.35pm: THE ASSOCIATED PRESS CALLS THE ELECTION FOR TRUMP
3.09pm: Caroline Yu Maurer, head of greater China equities, BNP Paribas investment Partners
"The short term negative impact on HK market is larger than China domestic A share market which is more immune from external market volatilities. Trade policies may see more uncertainties impacting China and Asian export industries. Trump seems to be more favorable towards traditional energy industry instead of new energy sector. That is likely to put pressure on new energy companies such as wind/solar globally.
"Trump’s support to infrastructure investment in the US may support global commodities prices and global economy. This is positive to global economy recovery and China economy as well. For our portfolio we focus on investing in china domestic demand driven companies. This event provides opportunities to add to those positions."
2.38pm: FX analyst at Societe Generale
"It looks like a Trump victory. The prospect has shocked financial markets and resulted in a sharp appreciation of most G10 currencies against the USD - led by the yen (3%), euro (2%), Swiss franc (2%) - but steep declines in EM currencies (MXN -11%, KRW -2%), though most Asian EM currencies are down less than 1% on the day.
"Stock markets are all weaker in Asia with the Nikkei down 5%, and bond yields are down, as would be expected given the uncertainty shock, though the moves in bond markets across Asia are highly diverse. Meanwhile, it looks as if the Republican Party also retained the majority in the House, and is ahead in Senate races. In Europe, the Commission forecasts should provide a first assessment of the 2017 Draft Budgetary Plans and point to a neutral fiscal stance. We also look for slightly lower growth numbers in 2017. In the UK, we expect trade deficit to narrow."
2.22pm: Debt syndicate banker in Singapore
“I don’t think anyone is crazy enough to go out tomorrow. Everything we have is now on hold. We will have to reassess next week, or the week after. Investors are risk-off right now. New issue premiums are going to be in the context of 15-20bp.”
The major reduction in risk appetite among investors means that any new issuance of Asian bonds is unlikely for at least the rest of this week, and perhaps even longer.
A fund manager in Hong Kong said his firm was not trading at all today, and that they were set to have a firm-wide meeting in the afternoon to decide how best to manage their risks in the event of a Trump victory. The firm had already hedged some of the election risk, he said.
“We will have to reassess our strategies,” the investor said. “There’s a panic reaction right now.”
Alastair George, Chief Strategist at Edison Investment Research
"The key parallel with Brexit is that the rise in political uncertainty under Trump is likely to create volatility in financial markets and business investment until the policy path becomes clearer. Similarly, we would highlight that in markets which have become systematically overvalued in recent years, the resulting consensus that valuation doesn’t matter can easily be shattered. In the UK’s case the direct impact was on sterling; for the US we would question the relatively high valuation of the S&P 500."
2.06pm: Rajath Shourie, managing director and co-portfolio manager in Oaktree's distressed debt group.
“I think a Trump presidency creates greater uncertainty. There is more chance of some interesting dislocations that people don’t expect, which tend to create opportunities in distress; and there are potentially contravening forces down the road because ultimately you’re never really sure what he will do.”
1.12pm: Deborah Bannon, investments business leader, North Asia ex-Japan, Mercer
“In the scenario that Mr Trump wins [the US presidential election], we are lining up with all our [asset owner] clients to consider their asset allocations and exposures and what it will mean. We are expecting to see a lot of short-term market volatility, regardless of the result. Despite this short-term noise we don’t think it will impact our long-term opinion about the appeal of the US.”
“We have not heard that much from clients; interestingly it’s generally been the smaller and medium institutions that want to speak with us straight away.”
Henry Ching, principal, Mercer Real Estate Asia
“Generally both our clients and us continue to have a strong conviction about the US market. Actually we have seen an increased level of activity [in terms of asset owner interest in investing into the US], so I don’t think they are that concerned about the prospects for US real estate. The US economy is the one bright spot in the world economy today, and that’s unlikely to change.”
12.58pm: Nigel Green, founder and CEO of deVere Group
"Global markets are being shaken up. You can hear early alarm bells ringing. This should be expected as markets tend to have knee-jerk reactions to these kind of situations, because Trump is represents uncertainty which markets hate, and also because the markets had all but priced-in a Clinton victory. Should there be a Trump win, the sell-offs in global markets will be compounded by the markets having priced in a Clinton victory and were wrong.”
11.30am: Bryan Collins, portfolio manager, fixed income, Fidelity International, in HK
In a Trump winning scenario: “We might see a little of volaltlity coming through in risky assets in the world, credit market will be no exceptional to that. In this scenario, you can typical see a flight to quality, government bonds and high quality assets will typical outperform and might have rally on this kind of news.”
11.12am: Kazuhiro Miyake, Chief Strategist, Daiwa Capital Markets
"[If Trump wins] Risk premiums on various markets (e.g. forex and stock markets) would rise and global money would become more security-conscious. From a somewhat longer-term perspective, the focus of attention would be on the extent to which the extreme remarks made by Trump during the election campaign about Mexico and Islam, as well as his advocacy for trade protectionism and other inward-looking policies, are corrected or stymied."
11am: Tom Taylor, head of economics, international, at National Australia Bank
"The outcome may finally lift some of the uncertainty that has hung over global markets in recent months. Much depends on the victor winning a clear mandate and not facing a continuation of policy gridlock because they are unable to get their legislation through a hostile Congress."
10.19am: Lim Say Boon, chief investment officer, DBS
"And if we are writing of President Donald Trump late this week, the market expects a 10% equities correction. That is probably right for the US market. But given Trump’s isolationist/America-first vision, the losses could be larger for other markets. Asian and Emerging Markets will likely suffer greater losses, given the possibility of a trade war with China."
