SINGAPORE – Asia’s emerging markets could be a disaster due to US President-elect Joe Biden’s latest $ 1.9 billion Covid aid plan.
This is according to James Sullivan, head of equities research in Japan, JPMorgan.
“Most investors were very positive about Asia and emerging markets relative to the US” before details of the latest bailout package were released, Sullivan told CNBC’s “Street Signs Asia” on Friday.
“Over the past few months, we have seen more than 18 consecutive weeks of inflows of funds into Asia ex-Japan,” he said, adding that it is “highly likely” that funds from emerging markets in Asia will start to turn around. back to the US due to the increase in economic growth through Biden’s plan.
Elected US President Joe Biden speaks as he outlines his plan to fight the coronavirus and start the country’s economy at the Queen’s Theater on January 14, 2021 in Wilmington, Delaware.
Alex Wong | Getty Images
Biden on Thursday unveiled the outline of its proposed package, titled the U.S. bailout plan, which includes measures to sustain families and businesses until vaccines are widely distributed. The plan includes stimulus tests as well as unemployment support.
Sullivan said JPMorgan had previously forecast a two percentage point backlog on U.S. GDP due to the lack of fiscal stimulus.
“We have built in a $ 900 billion fiscal stimulus package that has driven the 2 percentage point shift to a 70 basis point increase to US GDP,” he said of the previous forecast.
With Biden’s $ 1.9 billion plan now reaching more than twice the amount expected by JPMorgan, the analyst said it would be a “positive surprise” for the market as well as overall economic growth in the US be.
“The inflow of investor funds to Asia has been very aggressive over the past few months. You can see that it is going to reverse,” the analyst said. “I would say we’re maybe halfway through the trade at the moment.”
Sullivan predicted that the Chinese markets – which will perform directly in the region by 2020 – could be among the first to be affected by this shift.
“You will probably see that the aggressive performers of 2020 are a source of funds,” he said. “China will be very much in front and centrally there.”