Looking Beyond Trump

Emerging Markets:

Looking Beyond Trump

Donald Trump may dominate the headlines about emerging market economies this year, but it would be a mistake to ignore the impact of local elections and government policies.

Consider these five key events and their likely impact in 2017:

China: Xi’s Politburo reshuffle

Five retiring members of the Politburo will be replaced at October’s party congress. President Xi Jingping is likely to consolidate power as a result of the reshuffle, meaning key aspects of his economic policy, such as supply-side reform and the emphasis on innovation, will remain firmly on track.


India: Modi tested, with tax change key

State assembly elections this year and next are a mid-term test for Narendra Modi’s BJP party. However, the most important impact of the year will be policy driven: existing indirect taxes will be replaced with a unified goods-and-service tax (GST) in April. This has the potential to deliver significant improvement in India’s corporate infrastructure.


South Korea: Presidential election follows political turmoil

If a left-leaning president is elected (as is widely expected) in December, this is likely to mean accelerated reforms in the country’s large family-dominated conglomerates. It could also mean a more accommodating approach towards China – which would be welcomed by many companies with a focus on the Chinese market.


South Africa: New ANC president to show markets the way

The election of the new ANC leader in December will be an indicator as to who will replace Jacob Zuma as president in 2019. The market would favour current deputy Cyril Ramaphosa as a steady hand to steer the ship. Zuma’s preference, however, his ex-wife Nkosazana Dlamini-Zuma, would be a highly polarising choice, unlikely to enact the policies needed to boost growth.


Brazil: Temer lasts the distance

Brazil’s unpopular president Michel Temer actually appears likely to see out the remainder of his term to 2018. Successful passage of some of his proposed reforms would heighten conviction in a Brazilian economic recovery, as well as prompting a rally in equities and bonds. However, some proposals, such as labour reform, VAT unification and state debt restructuring, are unlikely to progress this year.

For a more on what could be in store for emerging markets in 2017, read Martin Currie’s Active Outlook on Global Emerging Markets.


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