US Elections 2016: Market reactions

US Election: Brexit deja vu in world markets as Trump takes White House

The market reaction to Donald Trump's win is drawing comparisons to Britain's unexpected Leave vote. Both events could have investors bracing for more uncertainty.
A trader on the floor of the New York Stock Exchange on Nov 8. US markets yesterday were calm when trading resumed, belying the earlier jitters that saw Dow Jones Industrial Average futures plunging more than 800 points during Asian trading hours,
A trader on the floor of the New York Stock Exchange on Nov 8. US markets yesterday were calm when trading resumed, belying the earlier jitters that saw Dow Jones Industrial Average futures plunging more than 800 points during Asian trading hours,PHOTO: REUTERS

Bourse falls prompt hope Fed will delay rate hike, which could boost equities, currencies

Stunned investors bailed out of share markets across Asia yesterday in the wake of Republican candidate Donald Trump's stunning victory in the United States presidential election.

Billions of dollars in value had been wiped off shares by the time his win was confirmed yesterday late afternoon, Singapore time, with traders bracing for more bloodshed once Wall Street opened.

Surprisingly, US markets were calm when trading resumed, belying the earlier jitters that saw Dow Jones Industrial Average futures plunging more than 800 points during Asian trading hours.

At the opening bell, the Dow inched up slightly before heading south. The index was about 80 points lower after 15 minutes of trading.

Earlier, in scenes reminiscent of June's shock Brexit vote, Singapore shares plunged as much as 2.1 per cent before paring losses to close down 1.1 per cent at 2,789.88.

 

Hong Kong tumbled 2.16 per cent, South Korea fell 2.25 per cent and Japan plunged a dizzying 5.36 per cent as investors began to factor in the anti-free trade rhetoric that Mr Trump voiced in the course of his campaign.

If markets here and across the world continue to fall in the wake of the Trump victory, the US Federal Reserve may delay its widely anticipated interest rate hike in December, a move that could then boost equities and currencies, analysts say.

The sudden falls yesterday underscored the degree to which investors were caught off guard as many polls had projected a win for Democratic candidate Hillary Clinton.

However, traders who took a contrarian view benefited from the sell down. "Some of us expected Trump to win, and had shorted the market," remisier Alvin Yong said.

Another broker told The Straits Times: "I would rather all the sellers get out first. The market has to find a bottom. Once Wall Street opens, there could be more people shorting the market and Asia could see more follow-through selling today.

"It's a question of how big, how long, and how bad. The regional markets could suffer more pain than Singapore because our market hasn't gone up as much."

US presidential elections usually have little lasting impact on equity markets "but this is no ordinary election", said Mr Vasu Menon, OCBC Bank's vice-president and senior investment strategist.

"Mr Trump's sheer inexperience in policy-making and unpredictability in demeanour and style spells greater uncertainty ahead."

The prospect of protectionism and lower global trade growth could further weigh on equity markets and risk assets worldwide.

 

"Asian markets would struggle to perform if Trump pressed ahead with his anti-trade policies. That is why we remain neutral on Asian equities," Bank of Singapore investment strategist James Cheo said.

"But if it becomes clear that Trump's trade protectionist talk is more bark than bite, while his tax cut "stimulus" becomes a higher probability, markets could, over time, cheer this outcome."

A version of this article appeared in the print edition of The Straits Times on November 10, 2016, with the headline 'Rush for exit in Asia; surprising calm in US '. Print Edition | Subscribe