Asia Market Slump Signals Trump Presidency

U.S. elections are hardly just about Americans. The U.S. economy, particularly its masses of moneyed consumers, touches scores of other countries and although it’s an old cliche, America is seen as a world police officer. Donald Trump is U.S. president  and will  probably bring economic shakeup and some policing to Asia.

It’s impossible to know for sure what Trump, a New York real estate billionaire, will do in Asia, since he lacks a record on national politics. But a wrap of his campaign statements points to a strong pullback in free trade, including the 12-member Trans Pacific Partnership, and an effort to contain China economically as well as militarily.

Asia would prefer more stability, if early stock market movement works as an indicator. As of 1 p.m. Wednesday China time, when Trump was leading Clinton, Chinese “A” shares were down 1.3% on the day, Hong Kong’s index had lost 2.82% and the Singapore exchange dropped 1.62%. The Japanese benchmark Nikkei 225 index was 5.35% lower.

 “There’s more uncertainty with Trump, and markets don’t like uncertainty,” says Michael McGaughy, head of research at Fusion Wealth Management in Hong Kong. He likened the market reaction to “dips” in Asia after British voters’ surprise decision in June to leave the European Union.

China is most likely to take the brunt of Trump’s Asia policies. He has demanded that Beijing’s leadership remove North Korean leader Kim Jong-un despite China’s policy of passive support for the roguish country. He has been quoted advocating that the U.S. government “strengthen the U.S. military…deploying it appropriately in the East and South China seas” where China is trying to expand its influence.

Beijing has upset Japan more than 30 times this year to date by passing vessels through a Tokyo-controlled tract of the eastern sea. In the South China Sea, the Communist government has riled Vietnam, the Philippines and three other governments by reclaiming 3,200 acres (1,294 hectares) worth of land and militarizing some land features in the 3.5 million-square-km (1.4 million-square-mile) body of water.

Southeast Asian and Pacific Rim countries would gain on a harsh U.S. policy toward China as they fret over maritime expansions. Vietnam, for example, was OK’d this year to buy U.S. weaponry and Japan looks broadly to U.S. military support in keeping China at bay.

Clinton would have taken a similar approach on the maritime disputes, per her record as President Barack Obama’s secretary of state from 2009 to 2013.

But the domestically populist Trump parts ways with Clinton on China trade ties. He wants to ease trade so more jobs will flow back into the United States and has called China a “cheater” at trade and “a currency manipulator” that keeps the yuan value low to help exporters. He has cautioned U.S. firms against revealing technology to the Chinese.

“If we’re going to make America number one again, we’ve got to have a president who knows how to get tough with China, how to out-negotiate the Chinese, and how to keep them from screwing us at every turn,” he was quoted saying during the 595-day campaign.

China’s official Xinhua News Service accused Trump in August of playing the “China-bashing card” with no ideas on how to resolve differences.

Trump’s comments, if for real, could set off a trade war with China and ripple into other countries, some economists say. “Federal Reserve policies, although independent from the government in many respects, will likely become less dovish and entail new leadership before very long,” forecasts John Vail, chief global strategist with Toky0-based Nikko Asset Management. Decisions would theoretically be easier to make with Congress also controlled by Trump’s Republican Party.

Four Asian U.S. allies would get punched if Trump moves to kill the U.S.-led Trans Pacific Partnership. He called it a year ago a “horrible deal that is going to lead to nothing but trouble” and alleged a $75 billion per-year imbalance with Japan. Japan, Malaysia, Singapore and Vietnam are the Asian signatories to the TPP, which removes trade barriers for 40% of the global GDP.

Clinton had fretted over elements of the TPP but was expected to find a way to make it work.

But Trump’s focus on infrastructure investment in the United States would boost world commodities prices and the world economy, says Caroline Yu Maurer, head of greater China equities with BNP Paribas Investment Partners. That trend would elevate China as well Indonesia, which depends largely on commodity exports.

“My intuition about the short-term direction for (Asian) markets is that a Trump victory would produce a short but significant draw-down, followed by a hiatus whilst the market tries to distinguish the rhetoric from the substantive,” says David Semple, portfolio manager with New York asset management firm VanEck.

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