Ring­git wins if Clin­ton wins, says AmBank

> How­ever, it could slide to 4.50 against dol­lar if Trump tri­umphs in US pres­i­den­tial elec­tion

The Sun (Malaysia) - - MEDIA & MARKETING -

PETALING JAYA: The ring­git is ex­pected to strengthen to 4.15 against the US dol­lar if Hil­lary Clin­ton wins the 2016 US pres­i­den­tial elec­tion, while the Malaysian cur­rency is ex­pected to weaken to 4.50 against the green­back if Don­ald Trump is vic­to­ri­ous, says AmBank Re­search.

In the wee hours of polling day in the US, the ring­git was weaker by 0.23% to 4.203 against the dol­lar as at 5pm in Malaysia yes­ter­day, Bloomberg data showed.

The re­search house said should Clin­ton win the pres­i­den­tial elec­tion, risk-on sen­ti­ment could see the US dol­lar strengthen against safe-haven cur­ren­cies like the yen, Swiss franc and euro. A Clin­ton vic­tory will mean less pol­icy un­cer­tainty com­pared with a Trump win.

It added that a Clin­ton tri­umph could see Asia ex-Ja­pan cur­ren­cies strengthen against the US dol­lar in the short term given the bet­ter sen­ti­ment and im­proved sta­bil­ity that could drive cap­i­tal flows back to emerg­ing mar­kets.

“Ben­e­fit­ing from the cap­i­tal in­flows into lo­cal mar­kets, we ex­pect the ring­git to strengthen to test the 4.15 level against the US dol­lar (cur­rently 4.21),” said AmBank.

It added that if Clin­ton wins, it will main­tain its end-2017 tar­get of 1,745 points for the FBM KLCI.

“We re­it­er­ate our view that a win by Clin­ton, while very much the mar­ket’s ‘base case’, would still trig­ger a re­lief rally in the mar­kets with the re­moval of the ‘Trump pres­i­den­tial risk pre­mium’ from the equa­tion.”

How­ever, it does not rule out the pos­si­bil­ity that a Clin­ton vic­tory could spark un­cer­tain­ties too.

AmBank said should Trump win the White House, surg­ing risk aver­sion could see the US dol­lar weaken against safe-haven cur­ren­cies. Bond mar­kets in de­vel­oped economies are ex­pected to rally while global eq­ui­ties are ex­pected to de­cline given the flight to safety flows in re­sponse to a Trump vic­tory.

Given the strong trade re­la­tions be­tween China and the rest of Asia, the re­search hose ex­pects most Asia exJa­pan cur­ren­cies to weaken against the US dol­lar. Risk aver­sion could worsen the sit­u­a­tion as it will re­sult in more cap­i­tal out­flows.

“We ex­pect the ring­git to weaken against the US dol­lar if Trump is an­nounced to be the next US pres­i­dent and could see the ring­git test a low of 4.50 (cur­rent 4.21) against the US dol­lar,” AmBank said.

If Trump wins, AmBank will cut its end-2017 tar­get for the FBM KLCI to 1,645 points.

“A win by Trump will trig­ger a ma­jor sell­off. We be­lieve it could last for days, weeks or months as the mar­ket tries to get a bet­ter grasp of what is in store for the US and global economies ...,” said AmBank.

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