US elections: As November 3 draws near, the case is building for global traders to buy Asia stocks over US equities

Since hitting an all-time low relative to the S&P 500 on September 2, the MSCI Asia-Pacific Index has outperformed the US benchmark by almost five percentage points

That nascent trend is expected to persist at least through the November poll and potentially beyond, according to strategists

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People wearing face coverings are reflected in a TV screen as people sit to watch a broadcast of the first debate between President Donald Trump and Democratic presidential nominee Joe Biden at The Abbey, with socially distanced outdoor seating, on September 29, 2020 in West Hollywood, California. Photo AFP

Published: 1:12pm, 10 Oct 2020Updated: 1:11pm, 10 Oct 2020

An expected surge in election-related volatility in the US stock market is paving the way for Asian shares to make a run at besting their American peers.

Since hitting an all-time low relative to the S&P 500 on September 2, the MSCI Asia-Pacific Index has outperformed the US benchmark by almost five percentage points. That nascent trend is expected to persist at least through the November poll and potentially beyond, according to strategists.

“There is a better than average chance that Asian stocks will outperform US stocks over the course of the next month,” said Eoin Murray, head of investment for international business at Federated Hermes. “The volatility rise will be more pronounced in US risk assets, and will pervade more globally but with less strength.”

Fears about a contested election result and President Donald Trump’s decision not to push for further stimulus ahead of the vote have helped contribute to the recent weakness in US equities. Meanwhile, a growing belief in a Joe Biden victory and Democrats winning control of both houses of Congress is seen benefiting Asian stocks by reviving the US economy and trade flows.

Dow Jones index since 1990. Source Manulife Investment Management. SCMP Graphics

“The probability of Asian equities’ outperformance will be higher under a Democratic landslide win,” said Nader Naeimi, head of dynamic markets with AMP Capital. “I firmly believe that trend will continue, Asia is under-owned and the US is over-owned.”