Asian Stocks Tumble as Trump Elected U.S. President in Shock Win

  • Japan’s Topix falls the most since Brexit as yen strengthens
  • Market wasn’t prepared for Trump win: Bank of Julius Baer

Is the Market Overreacting to the Election Results?

Asian stocks slumped the most since June in volatile trading as Republican Donald Trump won the U.S presidential race, shocking investors who had expected Democrat Hillary Clinton to win.

The MSCI Asia Pacific Index fell 2.7 percent to 134.19 as of 5:10 p.m. in Tokyo, with short-term volatility spiking on Wednesday as Trump stunned traders by defeating Clinton to become the 45th president of the U.S. Markets from Japan to India fell the most since at least June 24, when Britain shocked investors by opting to leave the European Union, as investors dumped global risk securities and bought safe-haven assets including the yen and gold.

“This is on a completely different level to Brexit,” said Norihiro Fujito, a Tokyo-based senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “The framework of the world will change, not only in terms of economies and the financial markets, but also in terms of national security, foreign policy.”

After starting the day higher, the Asian equity benchmark soon erased those gains as results started pouring in showing Trump edging ahead of Clinton in the most contentious U.S. election in recent history. The gauge languished near the day’s lows as it became clear that the real-estate developer and reality-TV star was gaining an upper hand in key states, putting him on course to become the president.

Surprised Markets

Just 81 shares rose compared with 899 stocks that fell on the Asian benchmark, while trading volume doubled in markets including Japan, Hong Kong and South Korea. The Topix Index slumped 4.6 percent for its biggest drop since June 24, dragged lower by exporters after the yen jumped the most in three months.

Taiwan’s Taiex Index fell 3 percent, its biggest loss since August last year. South Korea’s Kospi index lost 2.3 percent, New Zealand’s S&P/NZX 50 Index dropped 3.3 percent and Australia’s S&P/ASX 200 Index declined 1.9 percent. Singapore’s Straits Times Index decreased 0.9 percent, Hong Kong’s Hang Seng Index slid 2.2 percent and China’s Shanghai Composite Index fell 0.6 percent, retreating from a 10-month high.

“Much like Brexit, the polls and the betting websites going into the elections were telling us a Trump victory isn’t going to happen,” said Mark Matthews, Singapore-based head of Asia research at Bank of Julius Baer. The market wasn’t prepared for a Trump victory, he said.

The Republican, who has never held public office, was projected to be the victor early Wednesday by the Associated Press and television networks after Wisconsin pushed him over the 270 Electoral College vote threshold needed to become president-elect. When sworn in on Jan. 20, Trump will preside over a government he’s called corrupt and unworthy of trust.

“There’s still lack of clarity in terms of how this would pan out for markets in the next few days,” said Jingyi Pan, a market strategist at IG Asia Pte in Singapore. “Investors would want to hear the take of central banks globally and also from the president elect.”

At Stake

The MSCI Asia Pacific Index had fallen 3.1 percent from its September peak through Tuesday, as global investors looked to the election, which puts the leadership of the world’s largest economy at stake at a time when America is divided over immigration, trade and the country’s role in the wider world. Speculation Trump may win the election spurred swaps traders to trim wagers on tighter U.S. monetary policy, with market-implied chances of a December rate hike by the Federal Reserve plunging below 50 percent.

“It’s caught people off guard but it’s like Brexit,” Karl Goody, a private wealth manager at Shaw and Partners Ltd. in Sydney, which oversees about A$10 billion ($7.6 billion), said by phone. “You’re going to see a similar case where people realize there has been an overreaction in the short term and then once it all sinks in and they realize it’s not going to affect them as much as they first thought, you’ll see a significant turnaround and rebound in the market.”

Futures on the S&P 500 Index tumbled as much as 5 percent before paring losses to 1.7 percent. The underlying equity measure added 0.4 percent on Tuesday to cap its best two-day climb since June.

— With assistance by Yuko Takeo, and Adam Haigh

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