Trump fis­cal plan could spur spend­ing in EU too: C Suisse

Kuwait Times - - BUSINESS -

Don­ald Trump’s elec­tion will lead to an era of fis­cal spend­ing that could lift growth in the United States and spur Euro­pean gov­ern­ments to fol­low suit, said John Woods, Asia Pa­cific Chief In­vest­ment Of­fi­cer at Credit Suisse.

Trump, the Repub­li­can nom­i­nee who last week un­ex­pect­edly de­feated Demo­crat ri­val Hil­lary Clin­ton in the US pres­i­den­tial race, has promised to boost growth at home through a com­bi­na­tion of heavy in­fra­struc­ture in­vest­ment and deep cor­po­rate tax cuts. Although it is too early to say what mea­sures the new ad­min­is­tra­tion will pri­or­i­tize, or how they will fund them, Trump’s con­trol of both houses gives him great flex­i­bil­ity.

“The ini­tial in­di­ca­tions we have had from the in­com­ing gov­ern­ment cou­pled with com­ments made dur­ing the cam­paign trail have fo­cused in­vestor per­cep­tions on the in­fla­tion­ary con­se­quences of the ex­pected poli­cies,” said Woods, speak­ing at the Reuters Global In­vest­ment Outlook Sum­mit in Hong Kong. “By that, I mean there seems to be a much higher de­gree of fis­cal ac­tivism be­ing dis­cussed than pre­vi­ous ad­min­is­tra­tions,” he said. “It’s not be­yond the realm of pos­si­bil­ity that we start to see also fis­cal ac­tivism in the EU.”

Woods, who ex­pects a ris­ing trend for US in­ter­est rates, rec­om­mends in­vest­ing mostly in eq­ui­ties, with a pref­er­ence for seg­ments such in­fra­struc­ture and de­fense, health­care, fi­nan­cials and re­sources ex­plo­ration com­pa­nies. This is in an­tic­i­pa­tion of lighter reg­u­la­tion for the fi­nan­cial sec­tor, a par­tial re­peal of the Af­ford­able Care Act cham­pi­oned by out­go­ing US Pres­i­dent Barack Obama and more spend­ing in the con­struc­tion sec­tor.

Woods said he thought a full-blown trade war be­tween the United States and China, its largest trad­ing part­ner, was un­likely, de­spite the cam­paign rhetoric from Trump, who ac­cused Beijing of ar­ti­fi­cially as­sist­ing its ex­porters and talked of in­tro­duc­ing steep tar­iffs on Chi­nese goods.

“My own sense is that pre­cip­i­tat­ing, or in­creas­ing trade fric­tion for ex­am­ple be­tween the United States and China is frankly self de­feat­ing,” he said. Trump would also have a hard job in mak­ing the case that China is a cur­rency ma­nip­u­la­tor, given its econ­omy has been slow­ing in the past two years, trig­ger­ing mas­sive cap­i­tal out­flows, Woods said.

China’s fast-ris­ing debt and slow­ing eco­nomic growth topped the list of in­vestors’ wor­ries a year ago, but Woods said that was less of a con­cern now. “Why there’s been a sea change in opin­ion in my view now is be­cause we are see­ing some in­di­ca­tions of mod­er­a­tion in that de­cel­er­a­tion, and in­deed there are some peo­ple that even see some sta­bil­ity,”Woods said.

Woods said he ex­pected Beijing to fo­cus on sta­bil­is­ing growth un­til the next five-year plenum of the Com­mu­nist Party in Oc­to­ber 2017. Af­ter that, Pres­i­dent Xi Jin­ping, could take some tough mea­sures to rein in debt.

“The gov­ern­ment is en­tirely mo­ti­vated to sup­port growth and to cush­ion any down­turn be­cause I don’t think there’s a po­lit­i­cal will at the mo­ment to coun­te­nance a sharper de­cline in growth,” he said. “They are go­ing to have to na­tion­al­ize a large part of their debt, and they have the means to do it.” — Reuters

PARIS: French Econ­omy and Fi­nance Min­is­ter Michel Sapin (R) and Chi­nese Vice Pre­mier Ma Kai (left) pose prior to a joint press con­fer­ence fol­low­ing a Fran­coChi­nese Eco­nomic and Fi­nance meet­ing at the Econ­omy Min­istry, in Paris yes­ter­day. — AFP

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