Trump Era’s Top Asia Equity Losers Face Hurdles After Biden Win

(Bloomberg) -- Southeast Asian stocks, Asia’s biggest decliners during Donald Trump’s tenure, have a lot to tackle before reveling in Joe Biden’s victory in the U.S. election.

While cyclical-heavy Southeast Asia shares can benefit from a rise in the U.S. Treasury yields and a potential fall in trade tensions between the U.S. and China, an unwinding of the losses can only pick up pace once the region is able to manage the still-widening virus infections in some parts and find a path to remove domestic political uncertainty, market watchers say.

The MSCI Asean Index is still down about 18% this year after rallying more than 7% last week. The gauge has fallen about 8% since Trump’s election win in 2016.

“Southeast Asia will gain due to the return of trade under Biden but there are some specific issues that need to be fixed,” said Nirgunan Tiruchelvam, head of consumer equity research at Tellimer. “The region needs to do more on tech listings and virus control,” while Thailand and Malaysia need political certainty, he added.

Here are some key factors that can limit the upside for Southeast Asian equities:

Virus

Malaysia imposed monthlong movement restrictions in most states as the number of daily coronavirus cases hit a record on Friday. Indonesia’s economy has dropped into a recession as the country is grappling with Southeast Asia’s worst coronavirus outbreak.

Politics

In Thailand, anti-government demonstrators have been rallying for almost four months, with key demands including more accountability and transparency from the monarchy. In Malaysia, a vote on the budget will test Prime Minister Muhyiddin Yassin’s razor-thin majority amid discontent from the premier’s biggest ally and opposition parties.

Lack of Tech

The region lacks technology shares, the kind that have led a startling rebound in global stocks from their pandemic lows. Asean is missing out as the tech and communication sector accounts for just about 11% of the region’s MSCI gauge. That’s versus a weighting of more than a third in the S&P 500 Index and about a fourth in the MSCI Asia Pacific Index.

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