The Direction of Asia Markets after “Blue Waves” Takeover the “House”?

“Congress doesn’t have much of an ability to control trade policy” – a statement from RBC Capital Markets’ analysts.

The statement proves to be true, and yet, not entirely true at the same time. In fact, U.S. trade policy is developed and administered through three types of institutions: the U.S. Congress; the President and the Executive Branch; and independent agencies.

 

Drafting and approving a policy are the responsibility for both House of Representatives and Senate in order to find a common ground for a certain policy before regulated by the Senate.That is the reason why the House will not have much of an ability to control trade policy. “The Congress has become a gridlock,” that is what people are saying ever since Democrats took the House as the blue waves will likely lower Trump’s aggressiveness towards China.

 

However, both Democrats and Republicans are believed to support a tougher stance on Chinese trade and intellectual property practices. As a result, the president may enjoy bipartisan support as he pushes for Beijing to reduce the bilateral deficit.

Everyone knows that Democrats and Republicans always compete in the elections, but that does not mean Democrats will hinder the policy from Republicans that they see fit for the country.

 

“Partisan Democrats traditionally have been the more protectionist party while Trump Republicans are extremely hawkish with regard to everything relating to China,” said David Adelman, former U.S. ambassador. Democrats will allow Trump to have his way with the US-Sino trade as long as nothing absurd happens, for example, a withdrawal from WTO.

 

Now, a good sentiment should be starting to return to Asia markets more or less since there is at least one party in the Congress to block Trump from doing anything silly.

According to the report from EIU, Thailand’s auto space stands to benefit due to its well-diversified trade links with the U.S., Japan and other parts of ASEAN. As such, local parts producers should be able to win market share from Chinese competitors.

 

Nevertheless, another rate hike from the Fed is expected by this December, causing uneasiness to investors to shift their investments to find more promising short-term profit than Asia markets, especially the shaky emerging markets. When the interest rate goes up, bonds will also have the tendency to increase as well.

 

Recently, foreign investors have been on a row in buying from Thai stocks. Whether the majority of their stocks are gone so that they need to start buying, or seeing better opportunities in the Thai market, they are surely coming back to invest in Thailand. But once the rate hike hit the US market, we probably will face another long and worrisome selloff again.

The safe way to invest in this crucial time is to look for shares with a good and constant gain in financial statement reports. It is true that the coming of Democrats in the House will not secure Beijing from further trade disputes, but we can be sure that the situation has become slightly better than it used to be.