Asian markets should do well in 2017, money managers predict, provided Donald Trump delivers on his more constructive campaign pledges and abandons the rest, including potential protectionist minefields.
For the fast-growing, trade-dependent region, a lot rides on getting that best of both worlds.
“The big story in 2017 is going to be the U.S.,” said Daniel Morris, London-based senior investment strategist with BNP Paribas Investment Partners, in an interview. Whether the changes coming down the pike are “an opportunity or a threat to Asia depends on which path the U.S. goes down,” he said.
With the celebrity businessman turned politician less than a month away from being sworn in as president of the United States, many Asia-based analysts say they're confident Mr. Trump won't follow through on threats to impose hefty tariffs on countries — led by China and Mexico — that he singled out during the campaign for destroying U.S. factory jobs.
“For the moment, we do believe that his bark is going to be worse than his bite,” said Jonathan Reoch, BlackRock Inc.'s Hong Kong-based lead product strategist, Asian equities, at a Dec. 14 briefing in Singapore on the firm's global investment outlook.
“I'm pretty sure the chairman of Boeing ... the largest exporter to China ... has already called Trump,” said Geoffrey Wong, Singapore-based head of global emerging markets and Asia-Pacific equities with UBS Asset Management, at his firm's Nov. 28 investment outlook briefing.
UBS' base case is for Mr. Trump to avoid a “lose-lose” trade war and instead use his “famous skills to try to negotiate better trade deals” for the U.S., said Mr. Wong, adding emerging markets in Asia can do quite well under that scenario.
Such optimism is partly predicated on the president-elect delivering on his other campaign promises to slash U.S. corporate tax rates while pulling heavily on the government's fiscal policy lever to fund job-creating infrastructure projects.
The house view at BlackRock, the world's largest money manager with $5.12 trillion in assets under management as of Sept. 30, is that Mr. Trump's policies will power a “big inflection point” for the global economy, effectively shifting growth into a higher gear, said Belinda Boa, the firm's Hong Kong-based head of active investments, Asia-Pacific, at the Dec. 14 briefing.
She said developments elsewhere, including the success of Chinese policymakers over the past year in stabilizing the world's second-biggest economy, already had set the global economy on a reflationary path from the summer of 2016.
But with Mr. Trump poised to pick up the stimulus baton and run with it, BlackRock is significantly raising its forecasts for global growth, which should be very positive for emerging markets in general and Asia in particular, said Ms. Boa.
She called consensus figures for global growth now “too bearish.”
Separately, on Dec. 14, Keith Wade, Schroder PLC's London-based chief economist and strategist, raised his global growth forecast for 2017 to 2.8% from 2.6%.
While citing the prospect of U.S. fiscal policy providing additional stimulus, Mr. Wade said his decision to raise his forecast for Chinese growth to 6.5% from 6.2% was the primary factor behind the boost to his global forecast.
A Schroders news release about the upgrade predicted U.S. policy would likely be “neutral to positive for Chinese growth next year.”