FocusObama wins, but Asia stays cautious

05 November 2008 04:52  [Source: ICIS news]

By Hong Chou Hui

SINGAPORE (ICIS news) – The much-anticipated outcome of the US presidential elections today could provide some temporary boost to market sentiment but may not bring about any immediate solutions to the current global economic malaise, said analysts and market sources on Wednesday.

Democrat Barack Obama was confirmed as the 44^th US president after his Republican opponent John McCain conceded the race at 12:21pm Singapore time.

“The US economy will not recover quickly even with a new president at the helm because the fundamentals are still weak,” said a northeast Asian trader of monoethylene glycol (MEG) in Mandarin. 

Analysts ICIS news spoke to cautioned against being overly optimistic about the US economy’s recovery after today’s polls.

 

“In the near-term, it obviously could provide some boost to confidence in markets in general but confidence would likely fizzle out (after) the initial euphoria. Fundamentally there (are) still significant challenges, regardless of who the US president is,” said senior treasury economist Thomas Lam with Singapore bank UOB.

 

 “I don’t think whoever wins really will make much difference. From previous experience, the US markets tend to do well during and after the elections so at least until the New Year,” said regional economist Song Seng Wun with brokerage firm CIMB-GK.

 

The slowdown in the US economy on the back of the credit crisis which began in October 2007, and job losses of more than 150,000 in September this year have impacted on demand for Asian petrochemical products and consumer goods.

  

Obama had vowed to revive the country’s faltering economy with a slew of measures that include reviewing current commercial agreements with foreign trade partners and reviving domestic industries in his presidential campaign.

This had fuelled fears among some Asian producers that their livelihoods could be jeopardised by protectionist US trade policies come 2009.

“Obama has previously said that he will ban imported toys from China to protect the health of US children so this will definitely impact us as 80% of the country’s toy imports are made in China,” said an eastern China-based Chinese toy maker in Mandarin.

 

Analysts, however, disagreed with the sentiment and pointed out that a shift in US trade policy was both unlikely and counter-productive to recovery.

 

“I don’t think it (the US government) will want to engage in any potential policy which may alienate governments which you may call upon for help. I think they will be too busy trying to provide some lift to US consumers as the new administration looks for ways to finance (an) obviously very big deficit on the US side,” added Song.

 

“Obama will not impose restrictions on free trade come 2009 as the US cannot live without all the cheap products from other countries. If the US were to develop its own manufacturing industry, that would be a more costly alternative,” said Arden Dai, an analyst from consultancy firm Frost & Sullivan China, in Mandarin.

 

Asian markets were trading higher on Wednesday tracking US markets gains ahead of the US poll results.

 

Pearl Bantillo, Judith Wang  and Dolly Wu contributed to this article.

 

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By: Hong Chou Hui
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