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29 October - 04 November 2016
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Up to now I have been hesitant to comment on the impact on emerging markets of the result of tomorrow´s US election. That is largely because the outcome - a Hilary Clinton victory - has generally appeared fairly certain since the campaign started. The alternative has been difficult to contemplate but now, with the opinion polls narrowing and with Brexit fresh in the memory, we need to consider what might happen if Donald Trump wins.
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Mr Trump has essentially run on a protectionist agenda that, if implemented, would fundamentally undermine global trade. The imposition of tariffs and withdrawal from trade agreements would have huge repercussions for countries like China not to mention countries like Mexico that rely so heavily on the US for trade. The prospect of a Trump presidency is also likely to spook financial markets, never a good thing for emerging markets.
Usually we would take an independent stance on an issue like the US election. However, in this instance, it is hard not to be fearful about the implications of a Trump victory both for the USA and the wider world. A Trump victory would almost certainly lead to a significant initial weakening of the dollar, which could lead to a short-term boost for emerging market currencies. However, any such short-term filip is likely to be outweighed by longer-term concerns about the stability, health and direction of the world´s largest economy (and largest investor in emerging markets). World markets remain fragile and their prospects depend a great deal on the relative stability that a Clinton victory would bring.
Guy Dunn
Chief Executive Officer.
P.S. Here are some articles on the US election and emerging markets that I came across on the EMIS platform in the past week.
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INDIA 2014 & US 2016 ELECTIONS: TRUMP IS NO NARENDRA MODI
Some parallels between the current US presidential election and the last Indian Parliamentary elections are interesting to note. Economics and governance were major issues in both elections. The Donald Trump campaign has repeatedly focused on the economic stagnation in America and the importance of public investment being driven to infrastructure and industrial development.
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US ELECTION GUIDE TO MARKETS
After weeks of relatively calm expectations for a status quo US election result - Democrat in the White House, mostly Republicans in Congress - investors worldwide are boosting hedges against the possibility of a Donald Trump upset on November 8.
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In an interview with The Observer, President Juan Manuel Santos has spoken of his hopes for a peace deal with the guerrilla group FARC to be ratified by congress, through a referendum, or some other route before Christmas in case the process should come to an end with no success.
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Below are the most read articles in the past week on EMIS Perspectives, our daily blog of emerging market news and insights.
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NET PROFIT OF TURKISH BANKING SECTOR UP 56%
The overall net profit of the Turkish banking sector increased 56% on the year to 29.1 billion Turkish liras ($9.37 billion) in the first nine months of this year, anadolu agency reported.
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TANZANIA´S TOP LENDER CRDB SWINGS TO Q3 LOSS
Tanzania´s top lender CRDB turned to a Sh1.9 billion loss in the third quarter of this year from a Sh37.6 billion after tax profit in the same period of the last year due to unpaid loans and accumulated tax bills in the past.
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ABOUT EMIS
EMIS operates in and reports on countries where high reward goes hand-in-hand with high risk. We bring you time-sensitive, hard-to-get, relevant news, research and analytical data, peer comparisons and more for over 120 emerging markets.
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