KUALA LUMPUR: A win by Donald Trump in the US Presidential election could lead to a swift, knee-jerk sell off in the market, some analysts predict.
VCB Capital executive director and chief executive officer Mohd Amir Mokhtar he expects the Dow Jones index to drop by more than 10 per cent if the former reality TV star and property developer wins, and will recover within a month or two. Nonetheless, he believes Hillary Clinton may still win the election with a margin of 51:49 victory.
Franklin US Opportunities Fund portfolio managers and analysts are alert to the fact that each prospective Presidential Administration — either Clinton or Trump — may have very different regulatory priorities, particularly as regards to certain industries, such as Health Care or Energy.
That said, the future composition of Congress — equally unknown at this point—will play an important role in shaping public policy.
Franklin Equity Group portfolio manager Grant Bowers said current expectations reflect a very low likelihood of one party sweeping both elected branches of government (senate and house of representatives and president).
This split government creates the checks and balances that ensure, regardless of who the next President is, that any policy changes will be gradual and unlikely to reflect extreme positions.
“For the moment, we are mindful of the lesson of Brexit, in which that referendum outcome defied expert and consensus expectations,” he said in a statement Tuesday.
“In this regard, we are not positioning the portfolio for any particular outcome, nor changing our US Opportunities portfolio positioning or allocations materially in the expectation of heightened equity market volatility in the immediate term,” he added.
For US Opportunities, the team’s focus is on investing in companies with strong competitive advantages poised to benefit from long-term growth trends beyond near term election results or even the tenure of a single US President.
“We are more keenly focused on tangible fundamental factors outside of the political realm – such as earnings, free cash flow, and the identification of multi-year secular growth opportunities,” Bowers said.
Ekovest Bhd managing director Datuk Seri Lim Keng Cheng, meanwhile, said he expects Clinton will win and the result will only affect markets temporarily because 'if you (as a company) are fundamentally strong, you will be strong.'