What does a Biden Presidency mean for Asia?

Our US economist, James Knightley (JK) must be looking forward to some regular sleep again after the last few weeks of late-night / early morning conference calls, and then the drawn-out election itself. He tell us what he thinks this all means in the linked video. But note, he focuses predominantly on what this means for the US economy, and that is because President-Elect Biden's first priorities are likely to be domestic.

So he will focus on the pandemic, and then reversing some of the executive orders put in place by his predecessor on things like environmental control, bans on immigration from certain countries, rejoining the WHO and so on.

There is some good news in terms of growth as JK notes the likelihood of a fiscal stimulus package, perhaps of the order of $1tr in 2021 - equivalent to about 5% of US GDP. And that will be encouraging for Asia's exporters. But this optimism is tempered by realism about the pandemic, with case numbers above 125,000 for the past three days and the daily death rate in excess of 1000, the possibility of a reversion back to European-style lockdowns and double-dip recession can't be ruled out.

So while we may be keen to hear how Biden will approach relations with China (probably different in style rather than substance), trade (he is a free-trader, but he is also getting lots of revenue from tariffs that will be hard to give up), and technology (we don't see too many differences), it may be a while before Asia becomes a pressing issue for the new President-elect.

In the meantime, the USD is looking soft, and Asian currencies are being supported by default, though we suspect that near term, the USD may be capped by its 1.2011 1 September peak.

As well as a prospective new US President, the weekend also gave us Chinese trade figures. And as the linked note by Iris Pang notes, the strong export figures mask some underlying weakness, in particular for intermediate products that could point to export weakness ahead. This comes at a critical time of the year, ahead of the holiday season in the West.

Today also provides us with Malaysian production figures for September, which will tee us up for the 3Q GDP release later in the week. Malaysia is bucking the Asian trend for a gradual easing of restrictions, as its daily case numbers remain high by local standards (7-day moving average of daily cases now exceeds 1000, though to put it into context, that is less than the US' daily death toll from Covid, where daily case numbers are more than 100 times higher). These GDP figures will not only remain negative year-on-year in all likelihood, but the outlook for 4Q GDP is also dimming as a result, in spite of fiscal support.

Prakash Sakpal adds this detail on today's Malaysia report and implications: "Firmer exports in the reporting month support our forecast of stronger growth in today's industrial production release (ING forecast 2.7% YoY vs. 0.3% in August), helping us to fine-tune our 3Q GDP growth estimate, currently -11.8%, ahead of the release this Friday. As expected, Finance Minister Zafrul Abdul Aziz announced an expansionary Budget for 2021 last Friday with increased social and infrastructure spending to help the recovery after a record slump this year. The deficit as a proportion of GDP is targeted to narrow to 5.4% in 2021 from 6.0% this year. However, this hinges on projected 6.5-7.5% GDP bounce next year, up from about -4.5% contraction this year, materialising. These assumptions appear to be optimistic, given the continued local and global spread of pandemic".