What’s at stake in key emerging markets?

    761

    By Karin Strohecker

    LONDON – Emerging markets have historically fared better with a Democrat as US 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 percent of global GDP.

    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. “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 percent.

    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, US sanctions over the annexation of Crimea, meddling in US 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 percent this year.