美国选举后策略:把握回调机会吸纳

U.S. Presidential Election took place on 3 Nov, and results hang in the balance with votes still being counted in key swing states. We look at the impact on economy, U.S.-China relations and stock markets under three possible scenarios.

 

  • Scenario 1 – Biden wins with Congress split. Economic recovery is likely to be stronger if Biden is elected. So is the job market. We expect a new round of stimulus and policy clarity to lift market sentiment. Biden’s economic agenda involves massive government spending with priorities on infrastructure, green energy, health care and etc, which could outweigh tax increases.

 

  • Short-term impact on markets should be slightly positive, as Biden’s victory has been by and large expected and priced in, and uncertainties have been removed. Biden's policies are believed to be reflationary, favouring financial like banks and insurers. Clean energy sector will also benefit from higher demand, and TMT equipment sector sentiment will improve with expectation of a slightly better U.S.-China relations.

 

  • Scenario 2 – Trump wins with Congress split. Trump is likely to roll out tax cuts, infrastructure plan, but spending cuts on nondefense programs to narrow fiscal deficit.  Between US and China, strategic competition prevails in the long run regardless of who gets elected. What might make a difference is that Biden tend to take a less confrontational approach than Trump, and he will reunite American’s allies and pressure China in a multinational way. In the case of Biden being elected, some tariffs may be removed although national security measures will be kept in place. Phase One Deal will remain in force.

 

  • In the very short term, Trump winning against the odds may cause some elevated volatility in the markets, but his support for low interest rates and low tax rates should bode well for the U.S. corporate profits and stock market valuation in the medium term. For HK/China stocks, sectors which are more sensitive to U.S. policies could be under pressure in the medium term, such as TMT equipment and export sectors. In contrast, investors should favour sectors driven by China’s domestic demand and benefit from “inner circulation” strategy.

 

  • Scenario 3 – Contested election. If a losing candidate takes it to the court to challenge the validity of the election results, bringing uncertainties for weeks, then the market would probably move lower, in similar fashion to the 2000 Election. That said, those uncertain few weeks alone should not change outlook of economy and corporate earnings in the next four years. When are uncertain about Biden or Trump wins, stick with China domestic plays we suggested in the Trump-win scenario, i.e. Consumer, Capital Goods and Internet giants.
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