Comment: This years first geopolitical examination is approaching the market imp

Source: Bloomberg

Author: Tania Chen, Matthew Burgess

The Taiwan election on Saturday will be the first major geopolitics test facing global investors this year. Other challenges this year also include the Federal Reserve policy shift and the United States election.

Observer of Mainland China believes that the impact of the Taiwan election on the global market is most likely to gradually appear, rather than a large fluctuation, and the market impact depends to a large extent on the statement of the winner and the Beijing response.The campaign tone before the US election may also have an impact.

Patek Wealth Management and other institutions believe that if geopolitical risks are heating up, in addition to traditional risk aversion assets such as US dollars, yen, gold, etc., national debt in developed markets may also provide protection.Thornburg Investment Management Inc. said that in emerging market economies, countries such as Indonesia and other countries that benefit from diversified supply chain will strengthen, and South Korea will face challenges.

The upcoming Taiwan and Legislative Council elections will create a new political pattern, which may reshape at least four years in the next four years.Although the possibility of war is still minimal, some estimates that if most of the global advanced chips and one of the world's busiest routes are produced in Taiwan, the outbreak of war may be as high as about $ 10 trillion ($ 13 trillion),It is equivalent to about 10%of global economic output.

"If the result is unexpected and the potential tension is indeed exacerbated, the traditional hedging currency will benefit," THORNBURG's co -investment director Jeffrey Klingelhofer said.He said that the dollar and yen are obvious potential beneficiaries, and if the situation is the opposite, the Australian dollar will perform well.

If the independent current DPP's record of the Democratic Party of the ruling party has won the third term, it will constitute a new impact on Beijing.The Democratic Progressive Party currently leads the Legislative Yuan, and the election of legislators is equally important.

Patek's Rickie Jia pointed out that although gold is still a reliable tool for geopolitical risks, government bonds in Europe and Asian countries with good financial conditions can also provide buffer in the dense election year.

Beijing's reaction is critical

If the tension is upgraded, the response of Beijing is also important.

Anna Rosenberg, a geopolitical director of Oriental Huili, who manages $ 2 trillion, believes that if the so -called customs quarantine is implemented in mainland China and the main import and export except for the main essential products, the impact may be local and impact in Taiwan's currency., Stock market and real estate.

"I guess, the most likely situation is that there will be trouble in the later stages of President Lai Qingde, but it will not occur on January 14th,"Stephen Jen said.He expects the DPP candidate Lai Qingde to win."The key is that President Lai's actions in the next few months and years, as well as whether Beijing responded, or more actively invited Lai to participate in the negotiations."