Thailand is bracing for the negative effects of this week's US presidential election, whatever the outcome.
Because rising US bond yields will cause Thailand's borrowing costs to rise, while the US-China trade war is set to continue.
Amonthep Chawla, chief economist at Thai bank CIMB, said:
“Donald Trump's proposals to raise tariffs on Chinese and non-Chinese goods, as well as deport illegal immigrants, will hurt the U.S. economy, particularly the middle class and low-income people.
Furthermore, the trade barriers imposed by the current Democratic government would be maintained for four years if Kamala Harris wins.
Whether it is Trump or Ms. Harris who wins, the world will feel turbulence,” Mr. Amonthep said.
“Both candidates are likely to spend heavily to stimulate the economy, putting pressure on public debts and risking a government shutdown, as the United States has done in the past.
If Trump wins, exports of Thai products to the United States will benefit, as high tariffs are expected to be imposed on Chinese products.
However, this policy will also affect Thai exports to the United States via China.
Bond yields will rise, including for long-term bonds, which means benchmark rates for bonds issued by governments around the world as well as corporations will also rise,” he added.
Kasem Prunratanamala, head of research at CGS International Securities (Thailand), said Mr Trump would likely prefer traditional energy over renewable energy.
“We believe that oil prices could fall in the medium term with a Trump victory, which, in turn, is likely to negatively affect the oil and gas and refinery sectors on the Stock Exchange of Thailand,” Mr. Kasem said.
CGS believes investor sentiment on emerging markets is likely to become cautious if Trump leads the new government, he added.
Mr. Trump has proposed raising tariffs from 10 to 20 percent on most foreign goods and up to 60 percent on goods from China.
Thus, the brokerage expects more foreign direct investments from China to land in Thailand, which should bode well for the industrial real estate sector.
“With US Treasury yields rising, the baht is expected to weaken against the US dollar, which should bode well for exporters, such as those in the electronics and food sectors.
If Harris wins, the Thai market is expected to react more positively than if Trump wins.
Therefore, domestic stocks such as consumer, real estate and banks are likely to outperform defensive stocks,” Kasem said.
Brokerage Daol Securities believes a Trump victory would provide a short-term boost to the U.S. economy, stock markets and profits of publicly traded U.S. companies.
“However, there is a risk that inflation will accelerate as high tariffs on imports lead to higher prices.
If the Federal Reserve cuts interest rates less than the market expects, it will have a negative impact on stock markets around the world, particularly in Asia.
If Ms. Harris wins, the party's policy is to open more opportunities for free trade negotiations, but continue to block trade with China,” Daol noted.
See also:
Thai baht could fall if Donald Trump wins
Source : Bangkok Post
