U.S. election: what’s next for Asian markets?

On Tuesday, November 3, 2020, U.S. voters decided who would hold the balance of power in Washington. President-elect Joe Biden won the election (November 7), and at the time of this writing (November 9), President Trump hasn't formally conceded defeat.¹ The control of the Senate is still unknown as there are two runoff races to be held in January 2021 in Georgia.² We examine the potential investment implications for Asian equities under Joe Biden’s presidency.

U.S. bank stocks offer untapped potential—once the economy returns to normal

Asia, especially North Asia, could benefit

Under a Biden administration, the foreign policy order of preference is expected to be: 

  • Rebuild relationships with America’s allies 
  • Narrow the income gap
  • Focus on China

From a foreign policy and investment perspective, we believe that negative sentiment is likely to soften. While we wouldn't expect U.S.-China relations to improve signficantly, the bellicose rhetoric and sharp policy swings of the Trump administration might not be as frequent under a new administration. Although both sides share common ground on climate change and carbon-neutral environmental goals, human rights will remain on the agenda. Also, we don't think that the tariffs placed on China since 2018 will be rolled back; that said, the perception of trade conflicts and tension would ease.

From a U.S. dollar perspective, we expect the currency to remain weak, which should be a positive to emerging Asia as a whole, with a tilt toward the procyclical currencies in North Asia. In a split Congress scenario, U.S. tax, healthcare, and relief policies under the new government are likely to be more reactive than proactive—any discussions about further assistance will likely end in a deadlock. 

With COVID-19 being the highest priority for the new administration, the U.S. economy will probably enter a W-shaped recovery and shift to a lower growth path, especially if an effective vaccine is unavailable to the general public. We view this as a positive for China, as the country has recovered well from the COVID-19 outbreak, with third-quarter GDP coming in at 4.9% (year-over-year change after growing 3.2% in the second quarter3). More capital is therefore expected to flow into China given the growth divergence. Lastly, Biden’s policies on mending ties with countries in the developed markets should favor multinational companies as geopolitical risks subside.


A closer look at the election's impact on North Asia 

Over the past four years, the U.S. administration has strategically placed restrictions to hinder large-scale electronic device producers and burgeoning semiconductor developers in China. It has also executed a broader containment strategy of China’s economic development in other key sectors that has benefited high-tech producers in Taiwan and South Korea.

What will a new administration mean for North Asia? 

We expect—potentially—moderate relief from the escalating U.S.-China trade and tech tensions, but the general strategy of curbing China’s technological rise may not change in the longer term. We believe investors should expect China to become more attuned to the multinational rule-based approach as the country rises in global stature. While milder rhetoric may see multinational companies in China slow the process of supply chain relocation, they'll also be interested in the “dual circulation—Made for China” agenda as prescribed in the 14th five-year plan. 


A closer look at the election's impact on Southeast Asia

Ever since the U.S.-China trade war started in 2018 (and intensified in 2019), Asian countries have been focusing on self-help policies that promote growth. We envisaged that countries would organize themselves more around the concept of regionalization as opposed to globalization. 

Therefore, we believe the supply chain shift for low-end tech and manufacturing production lines to Southeast Asia will continue. Also, a weaker U.S. dollar would lower the financing costs for Southeast Asian companies, which, in turn, could help to attract more foreign direct flows and investment. The recent announcement that Chinese firms will collaborate with businesses from France, Japan, and South Korea (among others) to invest an estimated US$35 billion in Indonesian nickel mines and facilities by 2033 is a case in point.⁴ 

In India, the path of oil prices continues to warrant attention, as the country has been benefiting from declining oil prices over the year, which, to a large extent, improves the country’s balance of payments. 

It’s likely that Biden’s policy on Iran and immigration will have positive implications on India’s oil imports, as well as its information technology outsourcing industries. In addition, we believe that manufacturing growth will continue to be led by the government’s “Made in India” policies (incentives and tax cuts for domestic production) and a conducive global environment that's looking for a supply base outside of China. 


Asia’s robust growth drivers remain

Although the outcome of the U.S. election will have certain impacts on North Asia and some indirect effects on Southeast Asia, it’s important to note that the result is a stand-alone event and not an endgame. Instead, it’s more a gauge of future U.S. policy direction and its transmission to Asia. Indeed, Asia possesses many growth drivers that are adapting to the way people consume, react, and transact in a postpandemic world. For one, Asia still maintains higher GDP growth differentials relative to developed markets. As the region becomes increasingly self reliant and develops its own trading, technology, and consumption ecosystem, we believe investors who want a stake in Asia will need to explore more opportunities in this part of the world. 


1 “Biden Declares Victory, Calls on Americans to Mend Divisions,” Bloomberg, November 8, 2020 and “Donald Trump refuses to concede defeat as recriminations begin,” The Guardian, November 7, 2020.  2 Financial Times, November 8, 2020. 3 National Bureau Statistics of China, October 21, 2020. 4 “Indonesia sees China firms lead 'commitment' for $35 billion nickel investments,” Reuters, October 16, 2020.


A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, and affect portfolio performance. For example, the novel coronavirus disease (COVID-19) has resulted in significant disruptions to global business activity. The impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other pre-existing political, social and economic risks. Any such impact could adversely affect the portfolio’s performance, resulting in losses to your investment.


Investing involves risks, including the potential loss of principal. Financial markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments.  These risks are magnified for investments made in emerging markets. Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of a portfolio’s investments. 


The information provided does not take into account the suitability, investment objectives, financial situation, or particular needs of any specific person. You should consider the suitability of any type of investment for your circumstances and, if necessary, seek professional advice.


This material, intended for the exclusive use by the recipients who are allowable to receive this document under the applicable laws and regulations of the relevant jurisdictions, was produced by, and the opinions expressed are those of, Manulife Investment Management as of the date of this publication, and are subject to change based on market and other conditions. The information and/or analysis contained in this material have been compiled or arrived at from sources believed to be reliable, but Manulife Investment Management does not make any representation as to their accuracy, correctness, usefulness, or completeness and does not accept liability for any loss arising from the use of the information and/or analysis contained. The information in this material may contain projections or other forward-looking statements regarding future events, targets, management discipline, or other expectations, and is only as current as of the date indicated. The information in this document, including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Manulife Investment Management disclaims any responsibility to update such information.


Neither Manulife Investment Management or its affiliates, nor any of their directors, officers or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein.  All overviews and commentary are intended to be general in nature and for current interest. While helpful, these overviews are no substitute for professional tax, investment or legal advice. Clients should seek professional advice for their particular situation. Neither Manulife, Manulife Investment Management, nor any of their affiliates or representatives is providing tax, investment or legal advice. Past performance does not guarantee future results. This material was prepared solely for informational purposes, does not constitute a recommendation, professional advice, an offer or an invitation by or on behalf of Manulife Investment Management to any person to buy or sell any security or adopt any investment strategy, and is no indication of trading intent in any fund or account managed by Manulife Investment Management. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Diversification or asset allocation does not guarantee a profit nor protect against loss in any market. Unless otherwise specified, all data is sourced from Manulife Investment Management.

Manulife Investment Management

Manulife Investment Management is the global wealth and asset management segment of Manulife Financial Corporation. We draw on more than 150 years of financial stewardship to partner with clients across our institutional, retail, and retirement businesses globally. Our specialist approach to money management includes the highly differentiated strategies of our fixed-income, specialized equity, multi-asset solutions, and private markets teams—along with access to specialized, unaffiliated asset managers from around the world through our multimanager model.


These materials have not been reviewed by, are not registered with any securities or other regulatory authority, and may, where appropriate, be distributed by the following Manulife entities in their respective jurisdictions. Additional information about Manulife Investment Management may be found at www.manulifeim.com/institutional


Australia: Hancock Natural Resource Group Australasia Pty Limited., Manulife Investment Management (Hong Kong) Limited. Brazil: Hancock Asset Management Brasil Ltda. Canada: Manulife Investment Management Limited, Manulife Investment Management Distributors Inc., Manulife Investment Management (North America) Limited, Manulife Investment Management Private Markets (Canada) Corp. China: Manulife Overseas Investment Fund Management (Shanghai) Limited Company. European Economic Area and United Kingdom: Manulife Investment Management (Europe) Ltd. which is authorised and regulated by the Financial Conduct Authority, Manulife Investment Management (Ireland) Ltd. which is authorised and regulated by the Central Bank of Ireland. Hong Kong: Manulife Investment Management (Hong Kong) Limited. Indonesia: PT Manulife Aset Manajemen Indonesia. Japan: Manulife Investment Management (Japan) Limited. Malaysia: Manulife Investment Management (M) Berhad (formerly known as Manulife Asset Management Services Berhad) 200801033087 (834424-U) Philippines: Manulife Asset Management and Trust Corporation. Singapore: Manulife Investment Management (Singapore) Pte. Ltd. (Company Registration No. 200709952G) South Korea: Manulife Investment Management (Hong Kong) Limited. Switzerland: Manulife IM (Switzerland) LLC. Taiwan: Manulife Investment Management (Taiwan) Co. Ltd.  United States: John Hancock Investment Management LLC, Manulife Investment Management (US) LLC, Manulife Investment Management Private Markets (US) LLC and Hancock Natural Resource Group, Inc. Vietnam: Manulife Investment Fund Management (Vietnam) Company Limited. 


Manulife Investment Management, the Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers Life Insurance 



Ronald CC Chan, CFA

Ronald CC Chan, CFA, 

Senior Portfolio Manager, Chief Investment Officer, Asia ex-Japan Equity

Manulife Investment Management

Read bio