The Asian Assets That Matter Most to Traders as U.S. Finishes Voting

(Bloomberg) -- Asian assets will be among the first ones to move after America finishes voting on who will be its next president.

While the outcome of the race between Donald Trump and Joe Biden will reverberate across the world, investors in the region are focusing on what it means for the Chinese yuan and equities tied to climate change and stimulus plans, as well as the impact of U.S. policies on the healthcare and technology sectors.

Here are what traders have on their radar as initial election results trickle in:

Green Energy

Asia’s green stocks have rallied ahead of the polls on expectations that firms involved in environmental businesses, including renewable energy, will benefit from Biden’s $2.2 trillion clean energy plan. That may increase demand for solar panels and electric vehicles, according to Bloomberg Intelligence analyst Michelle Leung.

Stocks to watch include India’s Adani Green Energy Ltd., South Korea’s Hanwha Solutions Corp., China’s JA Solar Technology Co. and Xinyi Solar Holdings Ltd.

Yuan Volatility

Currency traders are pricing in a more volatile yuan after the U.S. presidential election, sending a measure of expected swings to the highest in Bloomberg data going back to 2011. The offshore yuan’s one-week implied volatility -- often used as a proxy of market risk -- has more than doubled in the past week. It has gained about 1.5% against the dollar so far this quarter.

The offshore yuan may be particularly sensitive to the election outcome given that some analysts view a Biden administration as potentially more moderate toward China in the trade war.

China Tech

Chinese internet stocks are expected to keep outperforming U.S. counterparts in the months ahead, especially if Biden wins. That’s thanks to his proposed tax changes for firms including technology giants, and potentially stricter antitrust regulation on the sector. A weakening of the U.S. mega-tech stocks and China’s aim to become a technological powerhouse can help bolster the relative attractiveness of Chinese companies.

Few expect U.S.-China tensions to go away completely, but Biden is seen as more likely to use conventional tactics in dealing with the world’s second-largest economy.

Indian software exporters may also move as they derive a large share of their businesses from America. While the Trump administration has been vocal about protecting jobs and wages, Biden’s articulated stance is a lot more moderate, according to Citigroup Inc.

Cyclicals

If history repeats again, a Trump win may be supportive for cheap stocks in the short run, according to a note from Jefferies Financial Group Inc. strategists including Desh Peramunetilleke.

Read Bloomberg’s U.S. election guides for stocks in South Korea, Australia, Japan and India.

The firm compiled a list of stocks that had reacted most positively from Trump’s victory in 2016, dominated by “high beta-value cyclicals” ranging from Indian trading house Adani Enterprises Ltd. to Singaporean lender DBS Group Holdings Ltd. The basket has been underperforming the broader market and sank to a new 2020 low on Tuesday.

That said, if Biden wins and is able deliver a “significant” fiscal stimulus, that’s also supportive of cheap and economy-sensitive stocks, Peramunetilleke said. Under the Democrat, potential infrastructure spending will lead to a more balanced and sustainable economy, which would be positive in the long run, according to an earlier note from the broker.

“Irrespective of the election outcome, there is a case for value stocks,” he wrote.

Yen, Won, Rupiah

The Japanese yen, Indonesian rupiah and Korean won are among Asian currencies most sensitive to U.S. election volatility.

Hedge funds ditched net short positions on the haven yen for the first time since September as investors braced for potential market swings, according to data for the week through Oct. 27 from the Commodity Futures Trading Commission. It has strengthened 0.8% this quarter. Conversely, two of Asia’s most growth-sensitive currencies -- the rupiah and won -- may also post hefty gyrations should foreign investors return or flee the region based on the election outcome.

“Underlying volatility in USD-IDR is much higher than other dollar-Asian currencies,” said Sameer Goel, global head of emerging-market research at Deutsche Bank AG in Singapore. The dollar-rupiah pair “can move up close to 2.5 to three times more in the event of a Trump win, versus going down on a Biden sweep.”

Healthcare

Biden’s call to end tax benefits for drugmakers -- by prohibiting companies from deducting expenses related to direct-to-consumer advertising -- may negatively impact some Japanese pharmaceutical companies.

However, his focus on investments in virus testing, a public health plan and the race for a vaccine is likely to aid India’s generic drug manufacturers.

Japanese drug companies’ shares have been lagging in the past few months.

©2020 Bloomberg L.P.