El miedo a Trump empuja a los ricos estadounidenses a interesarse por nacionalidades alternativas

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Fear over Trump Pushes Wealthy Americans to Look for Alternative Citizenships
CC-BY-SA-2.0, FlickrPhoto: Pixabay. El miedo a Trump empuja a los ricos estadounidenses a interesarse por nacionalidades alternativas

Desde que se confirmó que Donald Trump será el próximo presidente de los Estados Unidos, ha habido un fuerte incremento en el número de estadounidenses que se han interesado por programas alternativos de residencia y ciudadanía. Los inquietantes acontecimientos que han tenido lugar mundialmente, como el intento de golpe de estado turco, los ataques terroristas en Francia, el Brexit y ahora la llegada de Trump a la presidencia están teniendo un significativo impacto en el interés de los individuos y familias con patrimonios importantes en residencias y ciudadanías alternativas.

Tales picos se presentan cuando los ciudadanos no se sienten seguros sobre el futuro de su país y buscan opciones más seguras para sus familias. A medida que aumentó la posibilidad de que Trump ganara las elecciones el día 8, la web de inmigración de Canadá se bloqueó debido a una sobrecarga de visitantes.
En declaraciones desde la X Conferencia sobre residencia y nacionalidad global celebrada en Londres, Eric Major, director ejecutivo de Henley & Partners, declara ver un aumento en el interés de los estadounidenses por buscar nacionalidades y residencias alternativas similar al registrado cuando George W. Bush se presentó para ser reelegido presidente en 2004. «Ahora observamos surgir una tendencia comparable entre los estadounidenses con patrimonios importantes que se preguntan lo que depararán los próximos cuatro años. Ha habido un aumento significativo en el número de consultas a la web de Henley & Partners desde que se dio la noticia».

Ahora, en contraste con hace 12 años, hay muchos más programas de residencia y nacionalidad a través de inversiones disponibles entre los que escoger en todo el mundo. Cada vez más gobiernos están adoptando estos programas como un medio para estimular el desarrollo económico y el crecimiento de su país, y hay un número creciente de individuos ricos y con talento que buscan diversificar su carteras de nacionalidades para tener, ellos y sus familias, mayores oportunidades, libertad y seguridad internacionales. «Los gobiernos se están dando cuenta de los significativos beneficios de atraer ciudadanos globales que puedan hacer una contribución excepcional a su propio desarrollo y progreso económico. Además de la sustancial inversión inicial, estas personas aportan éxito empresarial contrastado, aptitudes que destacan globalmente y experiencia internacional, valiosas redes de contactos que pueden beneficiar al país y a sus ciudadanos enormemente», explica Major.

El Programa de Inversores Individuales de Malta fue recientemente clasificado como el mejor programa de nacionalidad por inversión en el Global Citizenship Program Index 2016, que considera una amplia gama de factores como la ley de inmigración, impuestos y calidad de vida, así como transparencia, riesgo y normativa.

«Los estadounidenses ahora tienen el mundo entero para elegir cuando se trata de adquirir una residencia alternativa o la nacionalidad. Tanto los relativamente nuevos programas de nacionalidad de Malta como los de Chipre dan derecho a vivir y trabajar en 32 países europeos, incluyendo Suiza, Noruega, Islandia y Luxemburgo, además de los 28 Estados miembros de la UE. El volumen de la inversión es razonable dados los privilegios otorgados y el proceso de solicitud es bastante eficiente. También hay numerosos programas de residencia de prestigio en Europa, como los de Reino Unido, Suiza, Bélgica y Austria, y el Programa de Migración por Inversión de Canadá sigue siendo muy popular entre los americanos”, concluye Major.

Short-Term Market Volatility May Also Create Opportunities for Active Managers

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Donald Trump’s unexpected victory in the Nov. 8 US election rattled global financial markets, sending US Treasury and most European sovereign yields higher.  Initially U.S. stock futures and the dollar tumbled and havens such as gold and the Japanese yen were lifted, pairing movements after the President elect’s speech however, investors eventually embraced the result of the election, buying stocks and selling bonds.

On Wednesday the Dow Jones, led by a rally in financial and health-care firms, rose 257 points while the US 10 year Treasury yield, a price reference for almost everything in the world, rose to 2.07%, its highest level since January.

Pioneer’s CEO and Group CIO, Giordano Lombardo, comments: «While the US election outcome is a surprise, it is by no means a «black swan» event. Markets had been strangely complacent leading up to the election, which was highly reminiscent of the pre-Brexit build-up.» while Monica Defend, Head of Global Asset Allocation Research said they believe «Trump’s policy agenda – although still unclear – may be bearish for income-related investments and could lead to a steeper yield curve.»

Neuberger Berman notes that «A Trump administration is likely to be better for the traditional energy sector, and less damaging to the healthcare and financial sectors, than a Clinton Presidency. United government may also remove the partisan obstacles to meaningful infrastructure spending and corporate tax reform, particularly the issue of profit repatriation—although it’s useful to remember that Trump is far from popular among many traditional Republicans.»

Chris Iggo, CIO Fixed Income, AXA Investment Managers believes that «in the end a stronger US is good for the world economy.» He also believes that «if actions follow promises, and it is a big if, then the forces that have kept rates expectations down might work to revise them higher.»Iggo points out similarities between the Trump election campaign and Brexit like the ineffectiveness of the polls, the similarities in the underlying economic anxieties and frustrations at the ineffectiveness of the “elite”, official institutions and big business which took for of bigotry and the fact that the outcome delivers uncertainty on the economic outlook. «However, the big differences are that with Brexit, the outcome of the referendum created the prospect of a huge negative shock for the UK economy, while Trump’s win means a potential economic boom to the US. Secondly, the UK has largely lost control of its economic destiny for the time being while, assuming Trump has a modicum of support in Congress, the new President will be very much in control. He may not have an overwhelming popular mandate, but the Republican Party, of which he is now the leader, is in control of all parts of government.»

According to Ian Heslop, Head of Global Equities at Old Mutual, and Manager of  the Old Mutual North American Equity Fund: «Looking further ahead, several of Trump’s policies, for example his protectionism, his desire to scrap existing international trade deals, and to deport illegal immigrants, have the potential to contribute to longer-term market volatility; but others, for example his plans to slash taxes, including reducing the business rate from 35% to 15%, his plans to encourage repatriation of corporate profits held offshore, and to embark on massive infrastructure spending, could stimulate the US economy, lifting equities. Much is uncertain, not least because his campaign promises have been long on rhetoric and short on policy detail.»

EM selection – a lesson for Trump survival

According to Legg Mason, EMs were one of the most hit sectors following Trump’s victory, as his well-known protectionist views could hinder EM exports to the world’s largest economy. The Mexican peso was again the proxy for the inversely correlated Trump-EM trade, plunging to historic lows. Other export-dependent currencies, such as the South African rand and the Colombian peso, also fell. Despite this pessimism, some EM local bonds and currencies rose, a sign of how investors are increasingly differentiating within the asset class, which once traded almost as a bloc. Yields of India’s local bonds, for instance, fell, given the country’s lower ties with the US and on the back of its more domestically-focused economy. The Indian rupee was one of the few currencies to rise against the greenback. Eastern European local sovereign bond yields also fell, as the region is more dependent on Europe than on the US.

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While the Mexican peso plunged 13% to lifetime lows, officials held back from taking action to support the currency and will not make a monetary decision until their meeting next week.

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From a Mexican Equity point of view, Barclays recommends investors to not overreact. While the MXN has weakened, the Mexican Equity market is indicated to be down by about 1-2% in local currency terms. They believe that many of Trump’s reforms would likely encounter opposition in Congress and are likely to require compromises. In their view, mexican sectors that are likely to underperform are manufacturing, industrial real estate and low-end consumption. To the opposite they believe large cap financials, large cap consumer stocks (mainly staples), telecom and infrastructure stocks are likely to outperform on a relative basis to the Mexican benchmark index.

While uncertainty has increased in the wake of Trump’s victory, financial markets ultimately tend to reflect long-term fundamentals. However, the short-term market volatility may also create positive buying or selling opportunities for active managers.

Trump’s Win And the Equity Markets

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The election results are a surprise to markets, say Hersh Cohen and Scott Glasser, Co-CIOs, ClearBridge Investments – a Legg Mason company.

“We believe it is too early to draw firm conclusions and prefer to see detailed policy proposals rather than relying upon campaign rhetoric. In our view, there are likely positive and negative implications for the U.S. economy and financial markets from a Trump presidency and a Republican Congress”.

The potential positives include tax reform, regulation and infrastructure investments. The co-CIOs have long advocated for tax reform and they believe a restructuring of the tax code for corporations and individuals – along with a more efficient vehicle to repatriate foreign cash – will be beneficial for economic growth and spending. They also expect a less stringent regulatory environment and “friendlier” oversight for consolidation (through mergers and acquisitions) to support market valuations. Finally, -they add- the country will benefit from strong fiscal policy to rebuild infrastructure. They view all of the aforementioned as market-friendly and stimulative to growth.

They also have some concerns including trade, monetary policy and the direction of interest rates. “Our biggest concern stems from commentary on trade and the potential impact of modifying existing treaties and agreements. We view potential restrictions on trade and any attempts to isolate or protect the U.S. from foreign trade as highly negative. In fact, this type of protectionism invokes memories of the 1930s when trade tariffs resulted in retaliation and caused the economy to eventually tumble into depression. While we do not expect this type of extremism, slower trade has the potential to mitigate some of the growth-oriented proposals”.

Lastly, monetary policy and interest rates remain a critical variable for both the markets and the economy generally, they note. “The proposed Trump policies are growth stimulative but also have the potential to push inflationary pressures back towards historical levels, thereby pushing up interest rates. While in the long run we believe this would eventually be healthy for savers and pensions and positive for spending, U.S. markets are very sensitive to changes in interest rates which have been excessively low for seven-plus years. Increased interest rate volatility would likely result in shorter-term market dislocations”.

They have had modest expectations for stocks for the last year and a half, primarily due to a combination of lackluster growth and elevated valuations, but believe sticking with a diversified approach across a portfolio that emphasizes companies with shareholder-friendly capital allocation policies is the prudent course as we enter a new presidential cycle.

The Markets are Red, While the House, Senate and Presidency Go Republican

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Markets around the world were in awe while the US election results were called on November 8th. At the end of the count, the House, the Senate and the Presidency were all red, and so were the markets. The Mexican peso, which throughout the campaign had been seen as a proxy for the President Elect‘s prospects, sank to its lowest level in history, plunging over 13% having its biggest fall since the so-called Tequila Crisis, in 1994.

Throughout his campaign, Donald Trump proposed increasing import tariffs, scrapping regional and global trade deals, and blocking worker remittances to Mexico. According to Nuno Teixeira, Head of Institutional & Retail Solutions Investment and client solutions investment division at Natixis, Donald Trump’s program seems more positive for equities, «with his proposal to cut back the maximum corporation tax rate from 35% to 15%, but his ultra- protectionist stance would dent companies with the most international exposure.» However the market’s first reaction was a sell-off.

While policy uncertainty will no doubt taint the markets, Natixis believes industrials, defense and oil would benefit from a Trump Presidency. Gold, is also expected to gain. Meanwhile, healthcare might get a surge given Trump wants to call into question the universal healthcare program implemented by the 2010 Obamacare legislation.

Emerging Markets, with the exception of Russia are expected to suffer in the short term. However, “in reality, if Trump were to keep to his Mexico trade agreements campaign promises, he may find punitive trade measures counterproductive given Mexico is the US’s second largest export destination and trade between the US and Mexico is interlinked.» Said Olga Fedotova, Head of Emerging Market Credit Research at AXA IM. Trump himself said in his speech, that he would be working with other countries.

According to Marco Oviedo, Barclay‘s Mexico Chief Economist and a former Mexican President Advisor the peso could fall to 22 per dollar, from an original level of 18.35 right before the election results. During the days prior to the election, the peso posted a four-day rally while expectations of a Democratic win grew. Mexico’s Central Bank Governor Agustin Carstens and Finance Minister Jose Antonio Meade have prepared a contingency plan but they informed in Mexico that they will not raise rates out of schedule. The next raise is expected to happen next week at their policy meeting.

Asian Institutions Face Pressure to Lift Returns

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Many Asian institutions are struggling to meet their targeted portfolio returns or have recorded negative returns amid the global market turbulence since mid-2015. This has forced them to look beyond core asset classes for yield and search for more non-traditional strategies as they seek to boost returns and reduce fee expenses on their portfolios.

This is one of the key findings from global research and consulting firm Cerulli Associates‘ newly released Institutional Asset Management in Asia 2016 report. While the number of traditional mandate issuances from Asian institutions declined, the pace of alternative searches and use of other non-traditional avenues like smart beta strategies have markedly increased among asset owners in China, Korea, Hong Kong, and Taiwan.

Alternative allocations, in fact, gave institutions like Korea’s National Pension Fund and Korea Teachers Pension Fund the strongest returns on their respective investment portfolios last year. This has strengthened the resolve of many Korean institutions to beef up their alternative exposures, with some of them aiming to invest at least 20% of their portfolios in alternatives before 2020. Apart from the allure of alternative investments, the underperformance of active managers has also prompted Asian institutions to think more about passive products or smart beta products. In Taiwan, assets allocated by pension funds to smart beta strategies surged by 62.2% to US$10.9 billion, accounting for 31.9% of their total overseas mandates as of June 2016.

However, Asian institutions are unlikely to have full-scale expertise in these areas any time soon, and will have to rely on external managers. «This burgeoning demand for alternatives and passive products will provide more opportunities than ever to managers known for their strong alternative capabilities,» says Manuelita Contreras, an associate director with Cerulli, who led the report.

This certainly puts pressure on traditional asset managers. In Cerulli’s survey of institutional asset managers in Asia, they ranked competition from alternatives and passive products among their top five challenges over the next two years. Many traditional asset managers have even jumped on the alternative bandwagon and built their alternative capabilities.

The growing competition for assets from the usual institutional investors in the region has also prodded managers to find opportunities at smaller institutions, including private banks, smaller pension funds, benefit associations, and small and mid-sized insurers. «Nowhere is this more evident than in Korea, where a slew of them have poured money into overseas investments, with some having even leapfrogged from passive to alternative investments,» says Rui Ming Tay, an analyst with Cerulli, who co-led the report.

US Elections: The End of the Fed’s Independence?

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According to Philippe Waechter, chief economist at Natixis, on election day, the economic context continues to look uncertain. Growth in the US has been weaker in 2016, while the world economic outlook is on a moderate slope. World trade is not progressing much and fails to act as a growth driver for the US. In other words, if the US economy wants to get back on the path to growth, it will have to rely on its domestic market, rather than external impetus.

In this respect, he believes the two presidential candidates’ programs offer very different, and often vastly diverging, solutions:

  • In the Democrats’ program, as embodied by Hillary Clinton, the overall approach is based on the acknowledgment of the current long-term stagnation in economic growth i.e. a situation characterized by insufficient private demand to ensure robust growth, as well as by major revenue inequality. The solution put forward by Hillary Clinton is to implement an infrastructure investment program, which would be financed by more hefty income tax on the highest earners, thereby giving domestic activity a boost and hence reducing inequality in order to gradually eliminate the risk of long-term stagnation. The program’s aim is to put growth back on an upswing by reallocating resources towards infrastructure investment, and this increased investment should in turn heavily encourage private investment. The program would be financed by higher taxes, so the impact on the public deficit would be limited and the public debt profile would only increase very slightly, and probably not be much different to what is currently projected by the US authorities.
  • Donald Trump’s program takes a different take on the economy. It is based on two major principles: the first is to considerably cut back household and corporation tax in order to bolster domestic demand; the second is to give the United States back its power and independence of bygone days. This involves pulling out of trade commitments and treaties, and international political commitments, as well as the implementation of a more protectionist framework with a significant hike in customs duties, particularly with China. The overall aim is to drive the domestic market, while reinforcing the United States’ independence from the rest of the world.

The choice of candidate will have lasting and very diverging consequences for the economy. For the rest of the world, the impact will also be very different depending on who wins. If the Democratic party wins, we know that Clinton is not opposed to free trade, although she is not a fervent supporter either (particularly the TTIP), so in other words she will not take protectionist measures but neither is she like to force greater trade agreements between countries or zones. From a political standpoint, the role the US plays in the worldwide equilibrium would continue.

If the Republican candidate is wins, then the situation will look very different. The shock on world trade would affect all participants in the world economy, driving activity down. No-one will escape this negative shock, and in particular China. Canada and Mexico, which do considerable trade with the US, would also be penalized, and Europe would also be affected by this radical change. The other point to note is that the Republican candidate does not want to see the US guarantee world security, contrary to the situation we have witnessed since the Second World War, and this would cast doubt over NATO membership. There is a risk that this situation would create a context for mistrust and suspicion, which is never good news for growth.

At Natixis, from a tactical standpoint, they maintain a considerably more positive stance on equities than bonds, based on:

  • projections for world growth that are still weak but downward risks are easing;
  • extreme valuations on the bond market, even after the rise in rates seen since the start of September;
  • the feeling that Eurozone investors should gradually factor in the upward inflationary trend out to mid-2017 and the likely announcement from the ECB in December of a less generous approach to its quantitative easing program during 2017, thereby promoting an upward normalization of long-term rates.

«In view of the likely Hillary Clinton victory, we maintain a positive view on emerging markets, particularly on emerging debt, once the rise in short-term US bond rates and the dollar has been processed.» Says Nuno Teixeira, Head of Institutional & Retail Solutions Investment and client solutions investment division.

The end of the Fed’s independence?

The two candidates’ attitude on the Federal Reserve is also very different according to Waechter. «We can expect few changes from Democrats: the candidate would guarantee the Fed’s independence and Janet Yellen could seamlessly continue to manage US monetary policy. The Republican candidate’s approach is radically different. This can be seen in the vast number of criticisms of Janet Yellen’s strategy. The danger is that he could attempt to reduce the Fed’s independence, either heavy-handedly by changing the law, or by revisiting an objective from Republicans in Congress to cut back the central bank’s leeway, all with the aim of forcing the Fed to follow precise rules in its management of monetary policy. The Fed could still be independent in legal texts, but in practice it would not be.» He concludes.

State Street Global Advisors Announces New Promotion Agent for SPDR ETF Business in South America

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State Street Global Advisors (SSGA), the asset management business of State Street Corporation, announced a partnership with Credicorp Capital which will serve as promotion agent for SPDR ETFs to institutional investors in Chile, Peru and Colombia. The partnership, which became effective September 12, 2016, will provide institutional clients throughout the region with local, dedicated SPDR ETF resources to help meet their portfolio management needs.

“Latin America is a strategically important market to the SPDR business and we are pleased to enhance our resources for clients throughout the Andean region,” said Nick Good, co-head of the Global SPDR business at State Street Global Advisors. “SSGA’s global ETF capabilities paired with Credicorp’s deep local relationships and expertise will result in an improved client experience.”

“We are thrilled to partner with State Street Global Advisors to represent their market leading family of SPDR ETFs. The Global SPDR business is the unquestioned ETF leader for institutional investors and we look forward to delivering enhanced resources to our clients across the Region,” said Alejandro Perez Reyes, head of Asset Management at Credicorp Capital.

Vanguard abrirá un centro de innovación en 2017

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Vanguard To Open an Innovation Center
Foto: Boegh . Vanguard abrirá un centro de innovación en 2017

Vanguard ha anunciado la creación de The Vanguard Innovation Center, una nueva operación totalmente enfocada al desarrollo de servicios para satisfacer las cambiantes necesidades de clientes individuales, financieros e institucionales. El centro de innovación, que se espera abra en el segundo trimestre de 2017, estará ubicado en Filadelfia, cerca de la sede mundial de la firma en Malvern.

«La innovación forma parte del ADN de Vanguard, desde la singular estructura de nuestro accionariado hasta la oferta del primer fondo mutuo indexado al mercado de inversores individuales», dice Bill McNabb, CEO de Vanguard. «El centro de innovación es un compromiso tangible de que mantenemos nuestro sólido historial de creación de capacidades que creemos que dan a nuestros clientes la mejor oportunidad para triunfar en las inversiones, y estamos encantados de que este importante nuevo paso tenga lugar en Filadelfia».

Hoy en día, más del 90% de las interacciones de Vanguard con sus 20 millones de clientes se producen digitalmente, lo que permite a la compañía aumentar la productividad, reducir los costes y mejorar la experiencia de los inversores. Entre ellas, las del Vanguard Personal Advisor Services, una de las primeras ofertas de la industria de asesoría híbrida -que combina la apuesta por el mundo virtual, un plan financiero personalizado y los sofisticados modelos informáticos de los roboadvisors con el juicio y entrenamiento comportamental de un asesor financiero humano-, lanzada en mayo de 2015, que gestiona ahora 47.000 millones en activos.

Aunque todavía se encuentra en fases muy iniciales, está previsto que el Vanguard Innovation Center sea un equipo interno de carácter emprendedor formado inicialmente por 20 profesionales y que sirva como catalizador de nuevas ideas y soluciones. Su equipo también evaluará oportunidades de colaboración con empresas y universidades.

«Estamos en medio de una gran revolución tecnológica -desde automóviles autodirigidos y drones para la entrega de paquetes a teléfonos inteligentes e impresoras 3D- que está cambiando nuestra manera de vivir, trabajar y, en el ámbito de Vanguard, invertir. Con nuestro centro de innovación buscamos aprovechar las tecnologías emergentes y los nuevos procesos para crear valor para nuestros clientes, mejorando su experiencia y resultados de inversión», añadió McNabb.

 

Joséphine Verine Appointed COO Marketing of the Lombard Odier Group

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Lombard Odier announces the appointment of Joséphine Verine in the newly created role of COO Marketing in the Marketing and Communication Department of the Lombard Odier Group.

Joséphine Verine will report to Fabio Mancone, Executive Vice President and Chief Branding Officer of the Lombard Odier Group.

She will be responsible for ensuring that marketing operations and project management run smoothly across units, markets and departments. In her role, she will also directly oversee events, publications, editorial content and client experience.

Joséphine Verine has more than 20 years of experience in the luxury sector. She joins from Chanel where she has been Managing Director of the Haute Couture Division for the last three years. Prior to that, she occupied a number of senior management positions in marketing, communication and retail at Dior, Céline, Armani and Louis Vuitton.

Joséphine Verine brings to Lombard Odier her valuable expertise and sensibility to luxury clients’ relationship management and service.

Joséphine Verine will be based in Geneva. Her appointment is operational as of 15 November 2016.

 

Concerns About a Sharp EM Correction are Overplayed

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Looking at the potential impact of the incoming 45th US President on emerging markets, the AXA IM Emerging Market debt team believes that trade and immigration policy has proved among the most contentious topics in the US elections. According to Olga Fedotova, Head of Emerging Market Credit Research at AXA IM: “Trump may find punitive trade measures counterproductive.” During their campaigns, Trump has proposed increasing import tariffs, scrapping regional and global trade deals, blocking worker remittances to Mexico, and has hinted at the mass deportation of undocumented workers. In contrast, Clinton has largely promised to oversee a continuation of the status quo. Takinf this into consideration, the specialist believes that concerns about a sharp EM correction are overplayed – «the direct impact of US trade on EM economies is modest, with EM countries sending just 16% of their exports to the US. However, Mexico remains singularly exposed, with 81% of its exports going to the US.»

Fedotova believes that if Trump were to keep to his Mexico trade agreements campaign promises, he may find punitive trade measures counterproductive given Mexico is the US’s second largest export destination and trade between the US and Mexico is interlinked. “China and South Korea take second place, with US imports making up 3%-4% of GDP. If Trump were to impose punitive tariffs against China, any counter action could inflict significant pain on US exports, whose third largest market is China. In EMEA, the trade ties with the US are modest, with Israel (1% of GDP) and Saudi Arabia (0.7% of GDP) the most exposed, although two-way links limit the risk to individual industries. For example TEVA, an Israeli pharma company which generates over half of its revenue in the US, produces Multiple Sclerosis drugs which current patents would make difficult to replicate. In Saudi, the trade account is balanced, with oil exports to the US offsetting imports of cars and machinery.»

In their view, the strength of the dollar is the main channel through which a US President affects EM. «Assuming some fiscal loosening, the Fed reaction determines the dollar impact. The new President inherits a strong dollar by historical levels and the major drivers of $/EM are turning favorable for EM. There could also be tension around «currency manipulation» and a high risk that the Trans-Pacific Partnership (TPP) is delayed or rejected.»

Meanwhile for Sailesh Lad, manager of the AXA World Funds Emerging Markets Short Duration Bonds fund “The severity of volatility and weakness in EM will depend on how quickly and what is implemented regarding the TPP. I recently attended the IMF meetings in Washington DC at which a panel debated whether Trump could rip up Nafta without government approval! This could have negative growth implications for not only EM but also US. If there is no room for fiscal expansion, then the Federal Reserve is the only institution who might be able to kick start the economy. Trade is clearly a point of contention, less so with Hilary than Trump, but it is important to note that US exports are a fifth of Mexico’s GDP, but only 4-5% in China and Korea and 2% or lower in the other manufacturing exporters. That said, a shock to global trade would clearly hurt all of EM.”

Overall they expect more volatility in markets in a Trump victory because of policy uncertainty. «In the medium term, the results of this election will have a global impact, not just an impact in EM countries. In my view countries with large external financing needs and high beta such as Turkey and South Africa may suffer and their debt underperform. Diverging foreign policy objectives could see shifts in geopolitical alignment. In our view Asia (ex- China) is least likely to be impacted. Ukraine may also suffer if Trump wins, as he is seen as being more pro-Russia, and therefore Russia could see more up-side than down-side. For example a victory for Trump could usher in a renewed détente with Russia, a relationship that has become increasingly strained under President Obama. While there are some fears about additional financial sanctions under Clinton, the marginal effect of further sanctions is likely to be limited.» Russian companies have largely adjusted through deleveraging, with total corporate external debt going down to USD 468bn in September 2016, from USD 678bn reported when sanctions were first imposed in 1Q 2014.2 Lastly, the Middle East could become more unstable with risk of more geo-political issues.

“A Clinton win should mean business as usual for Ukraine, as she doesn’t share Trump’s pro-Russia stance. We have been reducing our exposure to Mexico for both US election risk worries but overall we are slightly less positive on Mexico due to reform fatigue and concerns around certain Mexican corporate fundamentals. Also in Asia, we have been reducing overall exposure as we believe the region is expensive on valuation terms.»

Fedotova concludes: “Regardless of the winner, gridlock, pragmatism and self-interest are likely to prevent the market’s worst fears from materialising. Headline risk and volatility may increase, particularly with a Trump win, close trade linkages – 50% of US exports are destined for emerging markets, would make a fundamental shift in trade policy a case of beggaring thy self, rather than thy neighbour.”