KUALA LUMPUR (Nov 8): AmBank (M) Bhd said Democratic candidate Hillary Clinton's potential win in the U.S. presidential election today would lead to a relief rally in world share markets, "with the removal of the Trump presidential risk premium from the equation."
AmBank research head Anthony Dass and equity strategist Joshua Ng wrote in a note today that Clinton's win could bode well for U.S. shares in the immediate term.
"Technically, we expect DJIA, S&P 500 and NASDAQ to recover from 4 Nov lows by 1.6%, 2.4% and 5.7% to 18,170pts, 2,135pts and 5,335pts, over the immediate term. As all boats float on a rising tide, we believe FBM KLCI, technically, should recover by 1.4% to 1,672pts as well.
"Under this scenario, we will maintain our end-2017 KLCI target of 1,745 pts, which is at a 1x multiple premium to its 5-year historical average of about 16.5x. This premium is to reflect the sustained accommodative monetary policy stance adopted by central banks globally," the analysts said.
At 11:28 a.m., the KLCI rose 5.56 points to 1,656.15 points.
However, a win by Republican nominee Donald Trump will lead to a major sell-off in stock markets, as investors evaluate U.S. policies under the Trump administration, according to the analysts.
They said the sell-off could last for months.
"Technically, from the 4 Nov lows, we expect DJIA, S&P 500 and NASDAQ to fall further by -4.5%, - 4.1% and -7.1% to 17,075pts, 2,000pts and 4,690pts over the immediate term. We do not believe FBM KLCI would be spared, and technically we believe it will ease -2.0% to 1,615pts to retest the June’s low.
“Under this scenario, we cut our end-2017 KLCI target by 100 points to 1,645 points, which is at a zero premium to its 5-year historical average of about 16.5x. This to reflect the uncertainties in the US and global economies under the Trump administration, that would offset the premium arising from the sustained accommodative monetary policy stance adopted by central banks globally,” they said.