The outcome of the upcoming US presidential election will have major implications for Asia. If it results in victory for Donald Trump, the region will face much greater uncertainty, said UBS Global Wealth Management’s APAC chief investment officer Min Lan Tan.
US voters will go to the ballot boxes in November this year with Joe Biden and Donald Trump in a neck-and-neck competition. Although the race is currently hard to call, said UBS Global Wealth Management APAC chief investment officer Min Lan Tan, a Trump win could spell challenges for Asia.
«If we get a Biden victory, especially if it is with a divided Congress, then the impact on Asia is more or less status quo,» Tan said at a media briefing attended by finews.asia. «But if we get a Trump victory, then the level of uncertainty is going to rise much more».
Tariff Shocks
One highly anticipated headwind from a Trump administration is the resumption of a trade war. If a 60 percent tariff is imposed on Chinese products, alongside a 10 percent generalized tariff on all Asia exports, certain demand is going to «disappear entirely».
«Chinese sellers will have to find new markets for their goods whereas buyers will have to find substitutes, both of which is going to take time,» she explained, adding that this could result in a 1 percent reduction in the region’s overall GDP growth.
Major Factors
The level of impact of the tariffs will be dependent on three major factors. This includes the size of the tariffs, whether or not implementation will be gradual and China’s response. Should this all occur in a managed manner, Tan believes that there could still be relative stability as businesses seek to work around the restrictions.
Despite the concerns, UBS is still positive on Chinese equities including internet, consumer and high yield state-owned enterprises, as well as Korea. It is also positive on Indian large caps and large-cap Japanese banks. In terms of hedges against trade shocks, the bank recommends investments in gold as well as the Swiss franc.
