Affin Hwang AM Investment Forum 2019: Geopolitical Flare-Ups Key Market Risk

Geopolitics will continue to be a fixture of markets for time to come as increasing polarisation and fractures appear in bilateral ties leading to more volatility in turbulent times. “We are entering an unprecedented period of geopolitical risk that investors have to price-in when making decisions in their portfolio,” Teng Chee Wai, Managing Director of Affin Hwang AM said at the company’s annual investment forum held at MITEC, Kuala Lumpur on the 20th July, Saturday.

Teng contends that there is a possibility of US President Donald Trump winning a second term in the White House due to a lack of strong candidates from the Democrats and also Trump’s own ability to rile up political support by tapping into populist sentiment.

“The reality is that investors may have to live with Trump for the next 4 to 5 years if he wins election next year. His penchant for Twitter diplomacy has the ability to influence market behaviour and also introduce policy uncertainty unlike anything we have tread before. Will he be a better president or continue to be reckless if he wins? Nobody knows the answer,” adds Teng.

Unresolved US-China trade tensions which has stretched into a year-long trade war is another key risk that could roil risk-assets. Markets enjoyed a temporary reprieve since Trump and Chinese President Xi Jinping reached a trade truce in June at the G-20 summit in Japan, where both sides agreed to hold off from imposing any new tariffs and resume negotiations. However, the apparent lull in the trade war could easily turn the other way, according to Teng.

“Trade talks between US and China are not going to be easy with many structural barriers at hand. And knowing Trump’s volatile nature, he could just as easily upend negotiations and decide to impose tariffs again. Or he may decide to be best friends (sic) once more with China. This makes investing in this environment very difficult,” said Teng.

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