Asian markets mixed as caution builds ahead of high-stakes US election

ASIAN markets were mixed in early trade on Tuesday (Nov 5) as investors tread cautiously amid heightened volatility in anticipation of the US presidential election.

Market sentiment was likely tempered by uncertainty over potential shifts in US economic policy, trade relations and stimulus measures – all of which could ripple through global financial markets.

Lorraine Tan, director of equity research (Asia) at Morningstar Research, noted that jitters are emerging in the local equities market ahead of the high-stakes election.

The Straits Times Index (STI) was down 0.3 per cent or 11.82 points at 3,560.22 in early trade.

Across the region, major indices were mixed, with Hong Kong’s Hang Seng Index declining 0.8 per cent and South Korea’s Kospi falling 0.6 per cent. The Shanghai Stock Exchange Composite Index was down 0.1 per cent in early trade.

Meanwhile, Japan’s Nikkei 225 was up 0.8 per cent, while the FTSE Bursa Malaysia KLCI inched up 0.02 per cent in early trade.

By mid-day, the Shanghai Stock Exchange Composite Index logged the biggest gain, rising 1.8 per cent. This was followed by the Nikkei 225, which increased 1.3 per cent, and the Hang Seng Index, which was up 1.2 per cent. The FTSE Bursa Malaysia KLCI climbed 0.1 per cent.

The STI, on the other hand, was down 0.1 per cent, while Kospi declined 0.2 per cent in the afternoon.

The mixed performance came after Wall Street stocks ended Monday lower, and lower-than-expected jobs data was released last week.

The US economy added just 12,000 jobs in October, far below projections – boosting hopes for a Federal Reserve interest rate cut when it gathers later this week.

As investors brace for possible swings, attention remains on sectors and regions most likely to be impacted by the election’s outcome, with volatility expected to persist in the lead-up to results.

For instance, in Singapore, ST Engineering’s share price has fallen from its peak in mid-October at S$4.81, which Tan said could have coincided with media reports that Donald Trump had closed the gap in polls to Kamala Harris.

“ST Engineering is sensitive to high interest rates, and the common view is that a Trump presidency would lead to interest rates staying higher for longer as his inclination to raise tariffs could be inflationary,” she added.

Tan believes investors may prefer to stay on the sidelines amid heightened uncertainties.

Volatility in a neck-and-neck race

In a frantic last push before in-person voting on Tuesday, Harris has been visiting Michigan – a key battleground state – to rally the public, as well as appearing on television programmes and at football games to garner support. Meanwhile, Trump visited Pennsylvania, North Carolina and Georgia.

Polls show the race as neck and neck.

With the race to the White House too close to call, analysts believe that volatility in the Asian markets “should be of no surprise”.

Jason Kuan, director of investment research and advisory at CIMB Singapore, said: “Leading up to when the election results are announced, we should expect more volatility as markets tend not to like uncertainty.”

He noted that while markets may record larger swings post-election, Asian markets are likely to take the lead from the US markets – at least in the short term.

Paul Chew, head of research at Phillip Securities Research, noted that a Republican sweep could put pressure on bond yields and inflation if significant fiscal spending or aggressive import tariffs are introduced.

He said that in the short term, Singapore’s position as a trade hub is likely to be negatively impacted if import tariffs were imposed on Asean.

But if tariffs were applied uniformly across major exporters and accompanied by softer currencies, the impact will be muted, added Chew.

“A more significant concern is the long-term impact if tariffs are increasingly used as a political tool, with uneven tariffs imposed on countries that compete with the US interests,” he said.

CIMB’s Kuan said a Trump win will likely see equities perform better, while a Harris win will likely see fixed income outperform, led by tariffs and taxes.

But a victory by either is unlikely to change the direction of US policy towards China, said Morningstar’s Tan and senior equity analyst Wang Kai.

“We also anticipate (Trump’s) usual style of bombastic rhetoric could lead to market volatility.

“However, given that China’s equity prices have been beaten down mainly due to domestic economic issues, we also expect some divergence in performance should China’s domestic consumption recover as the government adds stimulus,” they said.

Impact on oil

Oil prices rose almost 3 per cent after the Organization of the Petroleum Exporting Countries Plus said it would extend its supply cuts for another month in December. They had been delaying output hikes on worries about slowing demand in China and the US.

Adding to the oil rally, the US dollar softened with recent polls suggesting Harris “might be gaining an edge”, said Stephen Innes, managing partner at SPI Asset Management.

“A weaker greenback typically fires up Asia’s demand for oil, and the prospect of a Harris upset has only added fuel to crude’s recent climb,” he added.