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What’s at stake in key emerging markets? By Reuters



© Reuters. FILE PHOTO: A combination picture shows U.S. President Donald Trump and Democratic presidential nominee Joe Biden during the first 2020 presidential campaign debate, in Cleveland

By Karin Strohecker

LONDON (Reuters) – Emerging markets have historically fared better with a Democrat as U.S. president and after this year’s underperformance under Republican Donald Trump, much of the sector might welcome the prospect of a Joe Biden victory in Tuesday’s election.

Opinion polls ahead of the Nov. 3 vote show Biden with a significant edge nationally over Trump in a race being closely watched by investors in developing economies, which account for nearly 60% of global GDP.

Graphic: EM and U.S. elections – https://fingfx.thomsonreuters.com/gfx/mkt/rlgvdjrqjvo/EM%20and%20US%20elections.PNG

Below is a summary of what is at stake in the U.S. elections for some of the major emerging markets.

1/CHINA

The world’s two largest economies – whose health is paramount for economies around the globe – have been embroiled in a tit-for-tat trade war under Trump. The biggest global goods exporter at $2.6 trillion and a huge consumer of raw materials, China’s economic engine fuels many commodity-dependent developing nations. Gyrations of its supply chain send tremors around the world.

Analysts would expect less bluster and volatility under a Biden presidency but few predict a change in substance, with competitive issues over technology and military remaining.

“The difference between Biden and Trump appears more about style than substance, although style matters,” said Marcelo Carvalho, global head of emerging markets research at BNP Paribas (OTC:). “However, protectionism is unlikely to go away.”

China is also staking out its place on capital markets, with increasing access to its $16 trillion bond market sucking in billions of dollars in capital flows. The yuan, one of the top emerging currencies this year, is up nearly 5%.

Graphic: China trade with the U.S. – https://fingfx.thomsonreuters.com/gfx/mkt/jznvnjmqzvl/China%20trade%20with%20the%20US.PNG

2/ RUSSIA

Prudent monetary policy, one of the strongest public balance sheets in the world and attractive real interest rates have made Russia a mainstay for investors, especially its $135 billion local sovereign bond market.

However, U.S. sanctions over the annexation of Crimea, meddling in U.S. elections and the poisoning of a former Russian spy in Britain in 2018 enjoyed bipartisan support in Washington. The push for more curbs could gain fresh momentum under Biden compared to Trump’s open admiration of his Russian counterpart Vladimir Putin. A surprise winner following Trump’s 2016 victory, the rouble has recently felt the heat, slipping more than 20% this year.

“The question now on investors’ minds is whether we are now going to see a return to this harsh sanctions’ agenda, involving areas such as sanctions on sovereign debt, dollar…



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