SINGAPORE – Emerging Asian markets could fall victim to the latest $ 1.9 trillion Covid aid plan from US President-elect Joe Biden.
This is according to James Sullivan, head of Japanese Japanese equity research at JPMorgan.
“Most investors were very positive in Asia and emerging markets relative to the U.S.” before details of the latest bailout package were released, Sullivan told CNBC’s “Street Signs Asia” on Friday.
“We have seen more than 18 consecutive weeks of fund inflows into the former Asian Japan over the past two months,” he said, adding that it is “very likely” that funds will start to rotate from emerging markets. of Asia. return to the US as a result of the boost to economic growth of the Biden plan.
U.S. President-elect Joe Biden speaks as he outlines his plan to fight the coronavirus and kick-start the nation’s economy at the Queen Theater on January 14, 2021 in Wilmington, Delaware.
Alex Wong | Getty Images
Biden on Thursday unveiled a breakdown of its proposed package, titled American Rescue Plan, which includes measures to support families and businesses until vaccines are widely distributed. The plan includes stimulus checks and unemployment benefits.
Sullivan said JPMorgan previously predicted a two percentage point drag on U.S. GDP as a result of the lack of fiscal stimulus.
“We had incorporated a $ 900 billion fiscal stimulus package into our forecast, which shifted from a 2 percentage point drag to a 70 basis point boost in U.S. GDP,” he said of the forecast. previous.
With Biden’s $ 1.9 trillion plan, which is now double what JPMorgan expects, the analyst said it will be a “positive surprise” for the market and for overall levels of economic growth in the US
“Mutual fund flows in Asia have been very aggressive over the last two months, you could start to see this the other way around,” the analyst said. “I’d say maybe we’re about halfway through the trade at this stage.”
Sullivan predicted that China’s markets, among those that achieved the best results at the regional level in 2020, could be among the first to be affected by this change.
“You’re likely to see the top aggressors of 2020 being a source of background,” he said. “China would be very central to it.”