Local stocks rallied sharply Tuesday as regional markets increasingly bet that America would pick Democratic standard-bearer Hillary Clinton as its next president.
The main-share Philippine Stock Exchange index (PSEi) gained 110.61 points or 1.54 percent to close at 7,307.80, tracking upbeat regional markets on the eve of the US presidential elections.
Japanese investment house Nomura tagged the US presidential election as the biggest “known unknown” markets have had to contend with since the global financial crisis—more than the Brexit (Britain’s exit from the European Union) vote, the 2012 US election, various peripheral European elections, US debt ceiling debates, Opec (Organization of Petroleum Exporting Countries) meetings or even US Federal Reserve decisions.
“The near-term market reaction will likely be driven entirely by the outcome of the presidential race. The higher likelihood there is still that Clinton prevails. Her slide in polling numbers appears to be stabilizing over the past two days and reports about a surge in early voting over the weekend are positive for her,” Nomura said in an equity research dated Nov. 7.
Nomura recommend using any such rally to trim positions in Asian equities, noting that it was almost impossible for Democrats to be in control of Congress and that a very narrow margin of victory would likely leave Clinton little room to maneuver on policy objectives. At the same time, it noted that Clinton was set to inherit a very difficult presidency on foreign policy, among other risks.
“On the other hand, a Trump victory would likely lead to a further selloff in Asian equities (down possibly more than 6 percent), at which point we would reevaluate our position as [hopefully] more clarity emerges about policy and economic implications,” Nomura said.