As Donald Trump’s victory in the US presidential race reverberates around the world, South African analysts are assessing what the impact might be for the rand, markets and the economy in general. The global financial crisis was a reminder that events in the US matter to the rest of the world. Trump has been vociferous in his condemnation of the forces of globalisation that have wiped out American jobs. For now, South African economists are expecting higher import tariffs to change the playing fields in favour of US companies. They also expect uncertainty to negatively impact on South African stocks. Trump’s win has caught many in the financial markets off-guard, with the rand highly volatile along with other emerging market currencies. More to follow… – Jackie Cameron
From Fin24
Cape Town – The surprise victory by Donald Trump in the US presidential race could have negative consequences for indebted South African consumers.
Trump’s uncertain policy stance will upset the establishment in Washington to the point that nobody knows exactly which direction he will follow, said Debt Rescue CEO Neil Roets in a statement on Wednesday.
Roets said this would bring profound uncertainty to financial markets including financial markets in South Africa.
The rand has been on a roller coaster ride in the last 12 hours, starting at a year-low of R13.18/$ in early trade, then reaching a high of R13.80/$ at around 05:00 and then rebounding to R13.55/$ by 12:30.
“There is nothing that markets hate more than uncertainty and the Trump victory will have a substantially negative effect on international markets, which will in short order manifest themselves in our marketplace,” he said.
“While the Trump victory may bring about a brief spike in markets, it will in short order be followed by a substantial drop because he is such an unknown quantity, which once again brings uncertainty to the marketplace,” Roets said.
“We can only guess at the ripple effect his election is going to bring to the world economy, but none of it is going to help deeply indebted consumers in South Africa to catch a breather,” he said.
If South Africa voted president Zuma twice why should America not vote president Donald Trump?
— Zwelinzima Vavi (@Zwelinzima1) November 9, 2016
However, Roets said a bigger problem was the announcement by ratings agency Moody’s that South Africa’s big four banks will see a rise in problem loans in the next 12 to 18 months as the economy struggles to grow.
“This problem has been a long time in the making as South Africa’s very low growth rate and growing unemployment has put growing pressure on consumers who are defaulting on their loans at near-record a levels,” he said.
Fin24
Source: http://www.fin24.com/Money/Debt/trump-victory-could-hurt-indebted-sa-consumers-expert-20161109
By Liau Y-Sing and Harry Suhartono
(Bloomberg) — Emerging-market stocks and currencies slumped amid a global selloff after Donald Trump won the U.S. presidency in a stunning upset.
The Mexican peso, a barometer of Trump’s fortunes, tumbled the most in eight years to its weakest level on record, while the Turkish lira sank to an all-time low and the South African rand fell the most in four weeks as traders dumped all but the safest assets. A gauge of developing-nation equities fell the most since September as exporters and banks provided the biggest drag on the measure. Shares in Hong Kong, Taiwan, India and South Africa paced losses.
Markets around the world were thrown into disarray after Trump pulled off a huge electoral upset to become the 45th president of the United States. Trump has put forward protectionist pledges that analysts say are likely to affect trade, including ties with Mexico and China.
“Markets were clearly unprepared for this. I think what we have seen today is only the knee-jerk reaction,” said Divya Devesh, a foreign-exchange strategist at Standard Chartered Plc in Singapore. “It’s entirely possible that risk aversion deepens in the coming weeks, leading to further selling pressure for emerging-market currencies.”
Trump, 70, was projected to be the victor early Wednesday by the Associated Press and television networks after Wisconsin pushed him over the 270 Electoral College vote threshold needed to become president-elect. When sworn in on Jan. 20, Trump will preside over a government he’s called corrupt and unworthy of trust.
#US just joined emerging markets. Forget quant methods and fundamentals, market forecasting now to be based on Trump's mood swings
— N.H. London (@htomyie) November 9, 2016
“Volatility will be very high and it will be difficult for people to position themselves,” said Indra Mawira, an investment manager at Panin Asset Management in Jakarta. “It is exciting but not the kind of excitement that we are looking for. The risk that Trump’s victory may slow down the pace of a Fed rate hike might be positive for emerging markets.”
Top Movers
* The peso slumped 9.3 percent to halt a four-day gain. The Mexican currency became one of the world’s most volatile ever over the past month as traders weighed the prospects that Trump could score an upset win in the presidential race and make good on pledges to renegotiate the free-trade agreement that’s transformed Mexico into an export powerhouse.
* The Hang Seng China Enterprises Index fell 3.2 percent. South Korea’s Kospi dropped 2.2 percent and Taiwan’s Taiex lost 3 percent.
* Indonesian miners, which rallied earlier this week on rising metal and coal prices spurred by bets for a Clinton win, reversed those gains. The Jakarta Mining Index slid as much as 3.9 percent. PT Adaro Energy dropped 6.4 percent and PT Indo Tambangraya Megah retreated 4.9 percent, while PT Vale Indonesia fell 2.7 percent.
#Trump presidency accelerates deglobalisation/protectionist trend. Bad news for emerging markets, growth downgrades likely. #ElectionNight
— Robert Ward (@RobertAlanWard) November 9, 2016
* Gold stocks jumped as bullion soared by the most since Britain’s Brexit vote in June. Gold Fields Ltd. surged 9.5 percent in Johannesburg, while AngloGold Ashanti Ltd. rallied 8.8 percent.
Currencies
The MSCI Emerging Markets Currency dropped 0.5 percent at 3:27 p.m. in Hong Kong, halting a two-day gain, as 10-day historical volatility jumped to the highest level in seven weeks.
The rand tumbled 2.3 percent and the lira weakened 1.1 percent, while declines in Asia were more sedate with the exception of South Korea’s won, which lost 1.3 percent. Malaysia’s ringgit and Indonesia’s rupiah dropped at least 0.5 percent, while the Philippine peso slipped 0.3 percent.
Russia’s ruble retreated 0.3 percent as Trump’s victory helped drive down crude prices on concern his protectionist policies will sap global growth.
Stocks
The MSCI Emerging Markets Index fell 2.5 percent, set for the steepest decline since June 24. Indonesian shares sank 1.5 percent, while stocks in the Philippines, Thailand and Vietnam lost at least 0.9 percent.
Recovery, then Rout: Mexcian Peso Plunges to Record Amid Trump's Electoral Earthquake pic.twitter.com/OjyNvEn6Ar
— Emerging Markets (@BloombergEM) November 9, 2016
India’s S&P BSE Sensex tumbled 2.5 percent after Prime Minister Narendra Modi’s government unexpectedly withdrew high-denomination banknotes. Indian sovereign bonds rallied, with the yield on Indian 10-year falling 13 basis points to 6.67 percent. “It’s been a bloodbath in the markets over the last few hours with the Mexican peso suffering particularly badly as Donald Trump edges ever closer to the White House,” Craig Erlam, London-based analyst at Oanda Corp., wrote in a note to clients. “The way markets have traded over the last couple of days and positioned ahead of the vote, you would think the election was going to be a routine victory for Clinton.”
Cape Town – A Donald Trump presidency could see an extra 15% import tariff slapped onto South African goods landing in the US, an economist said.
This would break a 100-year agreement on a 20% tariff, raising it to 35% and making South African goods seem too expensive, said University of the Witwatersrand lecturer Tinashe Chuchu of the School of Economic and Business Sciences.
“If it spikes by 15% it would discourage foreign nations from doing business,” he said.
This could have a negative effect on South Africa’s economy with less income and fewer jobs the likely result.
But Trump’s plans to revive sagging US production will not be as easy as simply slapping a higher tariff on imports.
He will have to wean the country off cheap imports from China and developing countries first.
Increased costs
Chuchu said that like many other countries, US companies have become dependent on China and developing countries, where production costs and salaries are much lower, to manufacture their goods.
“Many of his suits are not even made in the US,” quipped Chuchu.
Bringing these industries, such as the Detroit automotive sector, back online in the US would mean increased salary and production costs, which not all businesses would be able to afford.
“Even the US Olympic outfits were made in China. Ford, Chrysler – all moved to Mexico from being ‘proudly Detroit’.”
If these companies were to start producing goods in a country with high wages, salaries and taxes, production would decrease and sales and salaries would drop.
“It would have a devastating effect,” he said.
Backlash to globalisation
But it is not all doom and gloom for South Africa. As the country increasingly finds alternative markets for its goods it becomes less dependent on the US. Its reputation for high manufacturing standards should also see it through.
Trade and Industry Minister Rob Davies said Trump’s success was borne from the backlash to globalisation.
“He is for Americanisation,” said Davies.
The very fact that he won the Republican nomination showed that there are concerns about the impact of technological advances in the world.
Innovations like 3D printing and robotics could eliminate “boring jobs”, but there is the matter of people who lose their jobs as a result of this.
“Because the problem that we have got at the moment is the ‘winner takes all market’,” said Davies.
Davies is also driving a push for greater localisation of manufacturing in South Africa, where around 1.77 million people depend on it for work.
Fin24
Source: http://www.fin24.com/Economy/trump-presidency-could-usher-in-import-tariff-hike-for-sa-20161109
By Carin Smith
Cape Town – Whatever the outcome of the US presidential election, South Africa would have to analyse the impact and find opportunities for trade.
This was the view of Alan Winde, Western Cape Minister of Economic Opportunities, which he shared with Fin24 at an election event hosted by the US Consulate in Cape Town early on Wednesday morning.
“The world is changing and we have to see the US presidential election the same way as we saw the unexpected Brexit vote,” said Winde.
“We have to ask what the election result means for SA’s trade, just like we are working with the UK and Europe to find opportunities.”
Cape Town mayor Patricia de Lille told Fin24 at the consulate event that she did not realise the big underlying fears and hidden fears of many US voters.
“Donald Trump played on the fears of people and my biggest fear should he win, will be for a nuclear war,” said De Lille.
A Donald Trump presidency could see an extra 15% import tariff slapped onto South African goods landing in the US, an economist said.
This would break a 100-year agreement on a 20% tariff, raising it to 35% and making South African goods seem too expensive, said University of the Witwatersrand lecturer Tinashe Chuchu of the School of Economic and Business Sciences.
“If it spikes by 15% it would discourage foreign nations from doing business,” he said.
This could have a negative effect on South Africa’s economy with less income and fewer jobs the likely result.
Fin24
Source: http://www.fin24.com/Economy/sa-must-analyse-trade-options-after-us-elections-winde-20161109
