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US presidential election 2020
BusinessMarkets

Hong Kong stock traders love a first-term Democrat president as Biden unseats Trump, resets China relations

  • Hang Seng Index rose 135 per cent during Bill Clinton’s first term and 77 per cent during Barack Obama’s first four years
  • Global fund managers see US-China tensions persisting as Biden pledges to force China to play by the rules

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Stocks advance in Asia following Joe Biden’s win. The president-elect and his family members are seen saluting the crowd in Wilmington, Delaware, on November 7, 2020. Photo: AFP
Yujing Liu
Americans have voted to expel President Donald Trump from the White House. When Joe Biden is inaugurated in January, it should herald a rewarding time for money managers in the Asia-Pacific market, going by the history of Democrat presidents.
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In the most precedent, that meant a 50 per cent rally in Asian stocks during Barack Obama’s first four years, and risk-on mode for regional currencies. Last week’s market reactions suggest traders are keen for the pattern to repeat itself. The Hang Seng Index capped its best week since June, while the Shanghai Composite Index completed its biggest rally in almost two months. The yuan finished at the strongest level since June 2018.

“There’s a relief rally, that the destabilising, unorthodox president Trump is likely to be gone, and markets are celebrating, particularly China,” said Matt Gertken, geopolitical strategist at BCA Research. “Chinese and Hong Kong equities should benefit from that positive outcome.”

The Hang Seng Index and Shanghai Composite Index both surged 1.5 per cent at of 11.20am local time, optimism surrounding Biden’s presidency fuelling gains in risky assets across Asia-Pacific markets. The yuan advanced to its June 2018 high, while the dollar slipped against major peers.

US, China and Hong Kong stocks have outperformed under a Democrat president. While the S&P 500 index rose in eight of the past 10 presidential terms, the benchmark’s biggest gains came during the first four years under Bill Clinton (1993-97) and Barack Obama (2009-2012).

The Hang Seng Index surged 135 per cent during Clinton’s first term, coinciding with the first wave of initial public offerings of China’s state-owned enterprises in the city. It climbed 77 per cent during Obama’s first term, fuelled by extraordinary quantitative easing in the aftermath of the global financial crisis.

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The Shanghai Composite Index fared better during Clinton’s second term (1997-2001). The gauge jumped 124 per cent, leading into China’s accession into the World Trade Organization in December 2001.

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