MIDF Banks on Harris Win in US Elections
A Shift in Trade and Investment Prospects
As the US presidential election heats up, Malaysian Industrial Development Finance Berhad (MIDF) has given its perspective, leaning towards a Harris win. According to a report by Business Today, MIDF notes that Trump’s campaign pushes the agenda of lowering taxes, deregulation, and “protectionism,” while Harris’ side prioritizes higher “corporate and wealth taxes, targeted trade restrictions, and worker protections.”
Protectionism: A Challenge for Malaysia
Protectionism is defined as a country’s means to improve its industry by imposing restrictions, such as tariffs, as protection from foreign competition. MIDF notes that trade and investment prospects in Malaysia would be affected, regardless of who comes out on top. However, Malaysia’s existing trade relations with the US could be challenged by Trump’s protectionism.
A Harris Win: A Brighter Outlook
On the other hand, a Harris win could have a more positive implication, potentially strengthening US-ASEAN trade ties. Either way, Malaysia would “benefit from the shift in trade flow and higher regional investment.”
A MIDF Forecast
While betting markets and polls slightly lean towards Trump, MIDF “expects” a Harris win. Despite Trump slightly leading in most swing states, other factors, such as strong economic fundamentals, including “disinflation, income growth, and a robust labour market,” favour his opponent, taking into consideration the debate where she outshone Trump, possibly influencing voters on the fence.
Currency Market Implications
MIDF said a Harris winning the election could weaken the US dollar in the near term, stabilizing the US dollar index (DXY) to 102-103, hence supporting the ringgit with Fed rate cuts and prevailing policy continuity. A Harris win without a “decisive sweep” could forecast the USDMYR exchange at 4.25 by end-2024 and 4.10 by end-2025, assuming the current economic state persists.
A Trump presidential term, on the other hand, could improve the US dollar and cause inflation rates to rise, affecting the Fed policy and emerging currencies, including the ringgit, thus possibly constraining Fed rate cuts to around 4.0% to 4.5% by 2025, driving the USDMYR to 4.48 by end-2024 then moderately recovering to 4.37 by end-2025.
Bond Market Implications
MIDF said in the short term, a Harris win may lower US Treasury (UST) yields, benefitting Malaysian bonds while Trump’s victory suggests a surge in volatility, limit Fed rate cuts and push yields higher. These two scenarios suggest continuously high US deficit, thereby influencing “investor sentiment” and “bond market dynamics” in Malaysia.
Conclusion
MIDF’s assessment provides an interesting perspective on the potential outcomes of the US presidential election, highlighting the implications for trade and investment prospects in Malaysia. Whether a Harris or Trump win, Malaysia is likely to benefit from the shift in trade flow and higher regional investment.
FAQs
* What is protectionism?
+ Protectionism is a country’s means to improve its industry by imposing restrictions, such as tariffs, as protection from foreign competition.
* What are the implications of a Trump win on the US dollar and ringgit?
+ A Trump presidential term could improve the US dollar and cause inflation rates to rise, affecting the Fed policy and emerging currencies, including the ringgit, thus possibly constraining Fed rate cuts to around 4.0% to 4.5% by 2025.
* What are the implications of a Harris win on the US dollar and ringgit?
+ A Harris win could weaken the US dollar in the near term, stabilizing the US dollar index (DXY) to 102-103, hence supporting the ringgit with Fed rate cuts and prevailing policy continuity.