A Biden presidency seen as better for SA
As Democrat Joe Biden edged ahead in an ultra-tight US presidential election race on Friday, market players said a Biden presidency would be broadly positive for SA and other emerging markets.
But the positive sentiment was as much about expectations that a Biden presidency would see a more stable global environment as about its direct effect on the economy or markets.
Emerging-market stocks and currencies were on course for their best week in five months, Bloomberg reported. The rand, which was at R16.30 to the dollar earlier in the week, traded right down to R15.68 in the early hours of Friday morning as prospects of a Biden victory lifted, while the yield on 10-year government bonds, which had been about 9.2% earlier in the week, narrowed to 8.91%.
Anchor Capital co-chief investment officer Nolan Wapenaar said a Biden presidency would potentially be a rerun of the first Obama presidency, with the president hamstrung by a Republican Senate, making it difficult for Biden to put through the tax hikes his campaign promised.
But it would likely mean a more stable environment, which would go down quite well with the market and would be good for the global economy, Wapenaar said, as would a stimulus package in some form.
Independent economist Thabi Leoka said a Biden presidency would be important for Africa and SA, not only directly for the economy but as a global voice of reason on issues such as the Paris accord on climate change, and various trade and multilateral accords, many of which the US had exited under President Donald Trump.
“We need the US as the anchor country that is a voice of reason and a voice of democracy,” Leoka said. Trump’s trade wars and policies (on Iran, for example) had had direct negative impacts on some South African companies, she said.
Sasfin’s David Shapiro said: “There’s absolutely no doubt that a Biden victory will ease global tensions … We will be able to talk to Biden; we couldn’t talk to Trump. And that has to be good for Africa.”
Eurasia Group Africa analyst Darias Jonker, who is a former South African diplomat to Washington, said the election would still be disputed for the next two months and that would mean volatility.
“During this period financial markets will see uncertainty even though the market overall is pricing in a Biden victory. That is why we are seeing positive trends in emerging markets and emerging-market currencies, including the rand, but we could still see some downward pressure on asset prices,” Jonker said.
Biden already had foreign policy machinery in place and would likely resurrect Obama-era policy on Africa but was likely to push SA towards a more equitable trade arrangement with the US, Jonker said. However, he said a Biden administration could be expected to encourage US firms to invest in SA. “It will not be soft on China ... and will want to counter China’s influence by encouraging US investment.
“SA can certainly expect a Biden administration’s support for the government’s renewable energy programme.”