20161110-高盛-Asia_Views__The_US_election_s_potential_impact_on_Asian_markets_18页_989kb

Asia Views: The US Election's Potential Impact on Asian Markets

Core Content

The document analyzes the potential impact of Donald Trump's victory in the 2016 US Presidential Election on Asian markets. Trump's win, with 309 electoral votes and 48% of the popular vote, is expected to lead to significant policy changes that could influence global financial markets, particularly in Asia.

Main Points

US Election Outcome

• Winner: Donald Trump
• Electoral Votes: 309
• Popular Vote: ~48%
• Republican Control: Senate (52 seats), House (240 seats)

Policy Implications

• Fiscal Policy: Likely to be more stimulative, with tax cuts and increased infrastructure spending.
• Trade Policy: More hawkish, including potential withdrawal from the Trans-Pacific Partnership (TPP), renegotiation of NAFTA, and new tariffs on China and Mexico.
• Monetary Policy: Uncertainty remains regarding Trump's influence on the Federal Reserve's policy direction, particularly with upcoming appointments.
• Regulatory Policy: Less restrictive in energy, healthcare, and financial services sectors, potentially leading to the repeal of the Affordable Care Act.

Impact on Asian Equities

• Short-term Outlook: Moderate further decline, followed by a phase of range trading due to policy uncertainty and trade concerns.
• Market Conditions: Current valuations and risk appetite are reasonably supportive, similar to the aftermath of the Brexit vote.
• Regional Performance: South Asian markets are expected to outperform due to lower beta, less cyclical nature, and reduced trade exposure to the US.
• Themes and Sectors:
  • US-exposed stocks: May underperform due to trade policy concerns; stocks with over 30% revenue exposure to the US are highlighted.
  • China stocks: Sensitive to RMB depreciation, which could be accelerated by potential US tariffs.
  • Stable Growth: Favorable for markets with stable growth and lower volatility.
  • Infrastructure: Beneficial from US fiscal expansion.
  • Defensives: Attractive due to their domestic orientation, lower beta, and higher yields.

Key Information

Near-term Impact on Asian Markets

• Equity Markets: A 6% drop in the MXAPJ index from early October high; expected to remain in a range-trading phase until Inauguration Day.
• Valuation: Forward P/E at 12.9x, which is 1% above the long-term mean.
• Earnings: The earnings cycle is turning up, potentially supporting a recovery.
• Risk Appetite: Equity Risk Barometer (ERB) is at a lower level than during the Brexit vote, indicating a reset in risk appetite.

Impact on Asian Rates and FX

• RMB Depreciation: Expected to continue due to US tariffs and Chinese economic pressures.
• Forecast: RMB may depreciate to 6.8 by end-2016 and 7.3 by end-2017, a 7.7% depreciation.
• Bond and FX Performance: INR bonds and FX are likely to outperform; IDR, KRW, and MYR at risk of underperformance.
• Investor Positioning: Overweight on IDR, with KRW vulnerable to trade slowdowns.

Regional Tilt

• South Asia: Likely to outperform due to lower beta, less cyclical nature, and reduced trade exposure.
• North Asia: More exposed to US trade policies and may underperform.

Themes and Investment Ideas

• US-exposed stocks: Identified as potential underperformers due to trade policy uncertainty.
• RMB depreciation winners: Highlighted stocks with significant exposure to US markets, such as Biostime, Fuyao Glass, and Geely Auto.
• RMB depreciation losers: Stocks with high FX losses relative to sales, such as Nine Dragons Paper and China Huishan Dairy.

Summary Table

Exhibits Summary

• Exhibit 1: Current drawdown is smaller than historical average of minor corrections.
• Exhibit 2: Similar to the Brexit vote in terms of market reaction and valuation levels.
• Exhibit 3: Policy uncertainty is expected to persist or intensify.
• Exhibit 5: Earnings growth is showing signs of improvement.
• Exhibit 7: South Asian markets are more resilient due to lower beta and less trade exposure.
• Exhibit 9: Highlighted stocks with significant US sales exposure.
• Exhibit 10: Identified RMB depreciation winners and losers in China.
• Exhibit 11: Additional list of RMB depreciation losers.

Conclusion

The Trump victory introduces a mix of policy uncertainty and potential fiscal expansion, which could lead to a moderate decline in Asian equity markets, followed by range trading. South Asian markets are expected to outperform, while US-exposed and China stocks may face headwinds. RMB depreciation is likely, with specific sectors and stocks highlighted as potential beneficiaries or losers. Investors should consider defensive and stable growth sectors, as well as infrastructure and domestic-focused equities.