This is part of\u00a0Trump\u2019s \u201cAmerica first\u201d policy\u00a0\u2013 and may hand the mantle of main supporter of globalisation to China.<\/p>\n
Meanwhile, President Trump\u2019s next tweet storm \u2013 or the one after that \u2013 could hit Asian (or any other) markets.<\/p>\n
<\/span>The US election cycle and Asia\u2019s stock markets<\/strong><\/span><\/h2>\nIn the past, when a candidate from the Republican party of the US (such as Trump) became the country\u2019s president, Asia\u2019s markets had performed well overall during the first year (referred to as post-election year in this article) of the new president\u2019s term. Since 1981 there had been five Republican presidents in the US. During their first year, the KLCI has gained 9% on average.<\/p>\n
But the real fireworks really begun during the third year (which will be 2019 in the current US presidential cycle, also referred to pre-election year) of a Republican president\u2019s four-year term. During the third year, the MSCI Asia ex Japan Index saw average returns of nearly 38%, while Malaysia\u2019s stock market has risen an average of 25%.<\/p>\n
Except for Hong Kong, election year (which was 2016 in the most recent election cycle) has been generally weak for Asia\u2019s markets, with the MSCI Asia ex Japan rising just 2.6%, while Malaysia dropped by 4%.<\/p>\n
![\"trump\"](\"http:\/\/www.imoney.my\/articles\/wp-content\/uploads\/2017\/02\/trump-800x484.png\")
<\/p>\n
For our purposes here in the graph above, we break the election cycle down into four periods:<\/p>\n\n- Post-election year:<\/strong> The first calendar year after the U.S. presidential election. For the current cycle, it\u2019s this year \u2013 2017.<\/li>\n
- Midterm:<\/strong> The second year. This is 2018 in the current cycle.<\/li>\n
- Pre-election:<\/strong> Year 3 of the president\u2019s term, which is also the year before the next election. This will be 2019 in the current cycle.<\/li>\n
- Election year:<\/strong> The fourth year of the president\u2019s term, and the year in which elections are held. 2016 marked the election year in the previous cycle, and 2020 will be the current cycle\u2019s election year.<\/li>\n<\/ol>\n
<\/div><\/div>
\nHowever, the sample size for the Asian market results is small. The indices that we\u2019re using \u2013 and Asia\u2019s stock markets \u2013 haven\u2019t been in existence for many four-year American presidential cycles. And broken down by the two major US political parties, the sample size is even smaller.<\/p>\n
For instance, the KLCI has only been in existence for 10 US presidential election cycles. The MSCI Asia ex Japan Index has seen only seven, covering three Republican party presidents and four Democratic party presidents.<\/p>\n
The small number of data points means that historically, unusual periods (like big stock market losses during the global economic crisis in 2008, or particularly strong years for the stock market) have a very big impact on average returns.<\/p>\n
<\/span>Why would American politics affect Asia\u2019s stock markets?<\/strong><\/span><\/h2>\nOnly rarely does American foreign policy towards Asia have a direct impact on stock market performance in Asia. Far more important is the role of American politics on US market movements, and on global stock market sentiment \u2013 and therefore also on Asian markets.<\/p>\n
This may play out in a much larger way in smaller, less liquid markets in Asia (where a smaller absolute amount of funds invested or withdrawn can have a far greater impact than in bigger markets). So positive or negative sentiment in the US with respect to American policy, and presidents, might impact Asian markets more than others.<\/p>\n
In recent months, Trump\u2019s statements and tweets have had a big impact on a range of US stocks and sectors. For example, the market value of nine large US pharmaceutical companies recently lost almost US$25 billion in value in 20 minutes after Trump criticised the industry during a press conference.<\/p>\n
And his opinions and anticipated policies regarding China \u2013 threatening to label it a currency manipulator, and launch a\u00a0trade war with China<\/a>\u00a0have also pressured Chinese, and Asian, share prices in recent months.<\/p>\n<\/span>Trump and the Muslim world<\/strong><\/span><\/h2>\n
<\/p>\n- \n
- Post-election year:<\/strong> The first calendar year after the U.S. presidential election. For the current cycle, it\u2019s this year \u2013 2017.<\/li>\n
- Midterm:<\/strong> The second year. This is 2018 in the current cycle.<\/li>\n
- Pre-election:<\/strong> Year 3 of the president\u2019s term, which is also the year before the next election. This will be 2019 in the current cycle.<\/li>\n
- Election year:<\/strong> The fourth year of the president\u2019s term, and the year in which elections are held. 2016 marked the election year in the previous cycle, and 2020 will be the current cycle\u2019s election year.<\/li>\n<\/ol>\n
<\/div><\/div>
\nHowever, the sample size for the Asian market results is small. The indices that we\u2019re using \u2013 and Asia\u2019s stock markets \u2013 haven\u2019t been in existence for many four-year American presidential cycles. And broken down by the two major US political parties, the sample size is even smaller.<\/p>\nFor instance, the KLCI has only been in existence for 10 US presidential election cycles. The MSCI Asia ex Japan Index has seen only seven, covering three Republican party presidents and four Democratic party presidents.<\/p>\n
The small number of data points means that historically, unusual periods (like big stock market losses during the global economic crisis in 2008, or particularly strong years for the stock market) have a very big impact on average returns.<\/p>\n
<\/span>Why would American politics affect Asia\u2019s stock markets?<\/strong><\/span><\/h2>\n
Only rarely does American foreign policy towards Asia have a direct impact on stock market performance in Asia. Far more important is the role of American politics on US market movements, and on global stock market sentiment \u2013 and therefore also on Asian markets.<\/p>\n
This may play out in a much larger way in smaller, less liquid markets in Asia (where a smaller absolute amount of funds invested or withdrawn can have a far greater impact than in bigger markets). So positive or negative sentiment in the US with respect to American policy, and presidents, might impact Asian markets more than others.<\/p>\n
In recent months, Trump\u2019s statements and tweets have had a big impact on a range of US stocks and sectors. For example, the market value of nine large US pharmaceutical companies recently lost almost US$25 billion in value in 20 minutes after Trump criticised the industry during a press conference.<\/p>\n
And his opinions and anticipated policies regarding China \u2013 threatening to label it a currency manipulator, and launch a\u00a0trade war with China<\/a>\u00a0have also pressured Chinese, and Asian, share prices in recent months.<\/p>\n
<\/span>Trump and the Muslim world<\/strong><\/span><\/h2>\n
- Midterm:<\/strong> The second year. This is 2018 in the current cycle.<\/li>\n