Biden’s stimulus package to benefit global equities, commodities

The stimulus should benefit the O&G sector and contribute towards a speedier rollout of vaccines


US PRESIDENT Joe Biden’s US$1.9 trillion (RM7.66 trillion) stimulus package proposal would drive global equities and commodities higher and provide new impetus for recovery.

Oanda Corp Asia-Pacific senior market analyst Jeffrey Halley said Biden’s inauguration saw renewed momentum in global trade recovery with optimism the US$1.9 trillion package would be enacted soon.

“That propelled equities higher and saw a rotation into commodity currencies and Asian currencies, which have a high beta to the global recovery,” Halley told The Malaysian Reserve (TMR).

AxiCorp Financial Services Pte Ltd chief global market strategist Stephen Innes said the stimulus should benefit the oil and gas (O&G) sector and contribute towards a speedier rollout of vaccines, with Biden pledging to make vaccination his No 1 priority.

Innes said these factors will help alleviate O&G counters on Bursa Malaysia.

“The ringgit will benefit from both higher oil prices and a real Malaysian government securities (MGS) yield advantage to equivalent US bonds,” Innes told TMR.

Innes said Malaysia could further be a beneficiary of redirected foreign investment if the US and other countries clamp down on China as foreign manufacturing firms pull out of China and relocate to other Asean countries.

Williams Business Consultancy Sdn Bhd founder and director Dr Geoffrey Williams said the impact from Biden’s presidency has already been priced into the markets because investors already knew he will be the president since November last year.

Manulife Investment Management (M) Bhd senior MD and head of asset allocation for Asia Luke Browne noted that emerging-market stocks — bolstered by supportive monetary policy and heavily leveraged towards global trade and manufacturing — should continue to outperform.

He stated that two regions — the US and Asia, largely China — are preferred when considering tactical positioning.

“On a sectoral basis, we could see the information technology sector continue its leadership trend, however, the sector may come under further tax and regulatory scrutiny under a new Biden administration.

“Consumer discretionary is another sector in focus, despite elevated valuations,” Browne stated in a note yesterday.

From a style perspective, he said further stimulus and the reopening of economies could spur a second wave of rotation away from growth into value and cyclicals.

Supported by low-interest rates, a growth bias still holds favour — although in the near term, some of the cyclical and value-oriented markets, such as Europe and Japan, are worth considering.

Manulife Investment Management further noted that geopolitics will remain a headline risk, adding that the Biden administration is not expected to remove Phase 1 tariffs on China, with expectations of a similar policy in the near term.

He added the US and Europe could see improved relations under Biden.