Trustnet Magazine Issue 23 November 2016

IN FOCUS / SECTOR PROFILE / 20 trustnetdirect.com trustnetdirect.com 10% However, the initial reaction to Trump’s election has been muted and while the MSCI Emerging Markets index fell immediately after his victory was announced, oneday losses of 2 per cent are hardly indicative of impending doom. Jim Cielinski, global head of fixed income at Columbia Threadneedle IA Global Emerging Markets (8.05%) 5% 0% -5% -10% -15% Oct Sep Aug Jul Jun May Apr -20% Mar 35 per cent on those from Mexico. Other proposals that would have hit its southern neighbour included renegotiating the North American Free Trade Agreement, blocking American companies from moving factories south of the border and limiting the amount of money Mexicans working in the US can send home. Speaking ahead of the election, Gary Greenberg, manager of the Hermes Global Emerging Markets fund, warned that such proposals Feb Trump’s protectionist pledges while on the campaign trail had fund managers from all sectors competing to offer the most pessimistic forecasts about the impact on their investments if he were to be voted in. One thing they all appeared to agree on, however, was that emerging markets would be the biggest victim if their worst fears were realised. Among the president-elect’s campaign policies were a 45 per cent tariff on Chinese imports and MUTED REACTION PERFORMANCE OF SECTOR IN DOLLARS OVER 1YR Jan16 W HAT A DIFFERENCE A WEEK CAN MAKE. Whereas just a few days ago IA Global Emerging Markets was a rebounding sector that had made close to 40 per cent over the past 12 months and was being tipped to continue gathering momentum, the shock victory of Republican candidate Donald Trump in the US presidential election has led many experts to warn of a return to the doldrums. “A US-China trade war would likely drive Asian exporters into a steep downturn” Dec Adam Lewis examines the prospects for IA Global Emerging Markets after Donald Trump’s election victory brought the sector crashing back to earth had the potential to spark a trade war with countries such as China, which would have far-reaching consequences. “Unemployment in China could rise to levels that threaten social stability and in response the authorities could then impose capital controls, change the composition of its foreign-exchange reserves to include fewer US Treasuries, and restrict access for US firms,” he said. “US import prices could rocket, causing inflation and a housing market relapse. US stocks would move lower to discount this difficult scenario.” “China’s central bank has enough firepower to manage the pressure caused by a protectionist US, but the rest of Asia would find it difficult to adjust to lower trade surpluses and possibly weaker security. A USChina trade war would likely have global consequences, driving Asian exporters into a steep downturn and potentially causing a worldwide recession.” Nov15 WHAT A DIFFERENCE A WEEK MAKES Source: FE Analytics 21

Trustnet Magazine Issue 23 November 2016 | Page 22