East Asian stocks set for better 2017 if Trump thump turns into Trump bump

Wed Dec 7, 2016 3:12am EST
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By Sumanta Dey

BENGALURU (Reuters) - East Asian stocks are expected to have a better run next year, provided U.S. equities perform well on U.S. President-elect Donald Trump's tax cut plans and investors overcome concerns about a pending rise in protectionism, a Reuters poll found.

Asian stocks have performed unevenly this year, as a series of events from China's currency depreciation in January to the Brexit vote in June to Trump's shock election victory last month led to massive capital outflows from the region.

While the recent rise in major sovereign bond yields bodes well for stocks in general, several equity strategists said the outlook over the next six months was hazy, especially as it remains unclear how far Trump would go to fulfill his campaign promises that hinge on trade protectionism and migration curbs.

Still, the poll taken over the past 10 days showed equity strategists largely stuck to bullish views, their default position.

They expect the Shanghai Composite Index .SSEC, down 10 percent this year, to rise to 3,375 points from Tuesday's close of 3199.65.

From there, it is expected to end 2017 at 3,650 points, up 14 percent from now. But forecasts were in a wide range, from 3,250 to 3,905.

"With the possibility of large fiscal stimulus during the Trump administration, Asian equities could benefit from stronger growth and steeper yield curves, but could also suffer from U.S. dollar strength," Manish Raychaudhuri, an equity strategist at BNP Paribas, wrote in a recent note.

"U.S. trade policies under the Trump administration are currently even less clear than domestic fiscal policies and investors will have to grapple with likely turbulence caused by trade policies in 2017."   Continued...

U.S. President-elect Donald Trump gives a thumbs up to the media as he arrives at a costume party at the home of hedge fund billionaire and campaign donor Robert Mercer in Head of the Harbor, New York, U.S., December 3, 2016. REUTERS/Mark Kauzlarich/File Photo