US Elections 2016, the day after: Markets stabilise

Asian markets make quick recovery from US election shock

The Tokyo bourse, the worst hit of the Asian markets on Wednesday, closed strongly yesterday, with the Nikkei 225 rising 6.7 per cent. The Singapore market also rebounded, with the Straits Times Index adding 1.58 per cent yesterday.
The Tokyo bourse, the worst hit of the Asian markets on Wednesday, closed strongly yesterday, with the Nikkei 225 rising 6.7 per cent. The Singapore market also rebounded, with the Straits Times Index adding 1.58 per cent yesterday.PHOTO: BLOOMBERG

Rally tracks good showing on Wall Street and in Europe as Trump's spending plans, call for unity reassure investors

Asian markets yesterday rebounded, recouping most of the losses suffered in the immediate aftermath of the United States presidential election.

The rally followed overnight rises in Europe and on Wall Street on Wednesday, where an anticipated market meltdown did not materialise. Instead, US investors reacted positively to the election of Mr Donald Trump as the 45th US president, amid hopes that his plans for increasing government spending could help boost economic growth.

The Tokyo bourse, the worst hit of the Asian markets on Wednesday, ended strongly yesterday, with the Nikkei 225 soaring 6.7 per cent.

Hong Kong's Hang Seng index added 1.89 per cent, while Singapore's Straits Times Index (STI) gained 1.58 per cent to close at 2,834 points yesterday.

Analysts said Mr Trump's acceptance speech, in which he called for the country to unite, helped to calm investors.

KGI Securities trading strategist Nicholas Teo said though Asian markets had plunged while election results unfolded, they recovered quickly following the surprisingly strong showing in the US.

Despite the cheerier mood on Wall Street, longer-term prospects for small, open economies like Singapore might not be so positive.

If Mr Trump enforces his protectionist stance on global trade, export-reliant Singapore will be hit hard, noted a DBS equity research report. The Republic's shipments to the US account for 7 per cent of total exports.

 

Inflationary pressures from Mr Trump's pro-growth policies could also lead to higher US interest rates, another key risk for the market, the report added.

Mr Teo noted that investors will now be watching the US Federal Reserve's meeting next month, where an interest rate hike is likely.

"That will be the next key risk event. Markets might not have priced in a December rate hike, and if it happens, it might be a trigger point for a sell-down."

A version of this article appeared in the print edition of The Straits Times on November 11, 2016, with the headline 'Asian markets make quick recovery from US election shock'. Print Edition | Subscribe