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Trump presidency, strong dollar won’t hurt Asian stocks’ long-term prospects, says global fund

President-elect is unlikely to carry out the worst of his protectionist policy threats, according to Henderson Global Investors

PUBLISHED : Sunday, 20 November, 2016, 8:27pm
UPDATED : Sunday, 20 November, 2016, 10:30pm

President-elect Donald Trump’s rhetoric may be scaring investors, but the US’s new leader is unlikely to put in place policies that hurt Asian equities next year, according to Henderson Global Investors.

Although the stronger US dollar following Trump’s victory is not good news for Asian equities, there won’t be any other negative impact from the election, and Asian stocks remain a good long-term investment, head of Asia ex-Japan equities Andrew Gillan told the Post.

Trump had been critical of the Federal Reserve for not raising interest rates, so expectations of an increase were now heightened, leading to a stronger dollar which was not historically good for Asian stocks.

“In the short term I completely understand the knee-jerk reaction and the sell-off,” said Gillan.

“The key challenge in the short term is sentiment because emerging markets in Asia are seen as high-risk markets.”

But ultimately, he believes the long-term fundamentals in Asian markets remain strong, making the region a good place for investment.

“People have been scared by the rhetoric,” he said, adding that possible trade protectionism moves were a concern but that it was unlikely Trump would carry through on his very strict policies against the Asian supply chain.

“US corporates want to do business in Asia. Asia is the world’s growth engine still.

“On the fundamentals I’m positive, so if you invest based on fundamentals, over the long term, share prices reflect those fundamentals.”

In the short term I completely understand the knee-jerk reaction and the sell-off
Andrew Gillan, Henderson Global Investors

Henderson is tipping Taiwan and Indian stocks to do well next year. It sees Indian and Chinese equities as underweight.

Technology and consumer staples are industries with the most attractive growth potential, Gillan said.

Other analysts disagree with the views of the investment fund, which is owned by Henderson Group. Fitch has warned that Trump’s election could lead to more trade protectionism.

Such policies could have a significant impact on China and on Asian economies that supply intermediate goods to China, Fitch analysts said in a note.

“A ‘trade war’ would have adverse consequences for GDP growth and inflation in both countries, and could lead to depreciation of the RMB and would create financial market risk aversion, which would likely spill over to other emerging markets,” the note said.

If the US makes a concrete move towards labelling China as a currency manipulator, it could engender speculation of a trade war
Julian Wee, National Australia Bank

Last week Nomura maintained its neutral recommendation on Asia equities, excluding Japan.

“It is likely that the negative impacts from higher US yields and potential trade barriers will constrain any positive spillovers from better US growth or positive US equity performance,” analysts wrote in a research summary.

Meanwhile, National Australia Bank’s senior markets strategist Julian Wee said there had been a “rather organised response to the surprise US election result” - although he warned that could still change.

“The US election outcome seems to have been handled reasonably well in China’s financial markets – we only saw a mild response in volatility indicators and interbank markets,” he said on Thursday.

“If the US makes a concrete move towards labelling China as a currency manipulator, it could engender speculation of a trade war.”

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