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Investors Predict No Let Up in Market Bloodbath if Republican Candidate Donald Trump Wins

Markets fear a Trump victory could trigger global economic and political mayhem, creating massive uncertainty for investors who had been counting on a win by Democrat Hillary Clinton, whose policies were seen as more staid but predictable

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An employee of a foreign exchange trading company works in front of a monitor displaying a graph of the Japanese yen's exchange rate against the U.S. dollar in Tokyo, Japan, Nov. 9, 2016. VOA

Investors should brace for a further slump in global stock markets, the U.S. dollar and most commodities if Republican candidate Donald Trump becomes the next U.S. president, as appeared increasingly likely Wednesday. Markets fear a Trump victory could trigger global economic and political mayhem, creating massive uncertainty for investors who had been counting on a win by Democrat Hillary Clinton, whose policies were seen as more staid but predictable.

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“If current market moves hold or go further, there is likely to be quite a bit of de-leveraging and forced selling tomorrow,” Mohamed El-Erian, chief economic adviser at Allianz, said as global markets skidded.

Trade could slump

Trump has threatened to rip up major trade agreements and impose barriers in the United States on imports from countries such as Mexico and China, which could reduce trade flows and harm sluggish global growth.

Jack Ablin, chief investment officer at BMO Private Bank in Chicago, forecast U.S. stocks could drop as much as 10 percent over the next 10 sessions if Trump is elected to the most powerful office in the world.

“Investors don’t know what he [Trump] is going to do; the policies he’s laid out have been vague and his demeanor is capricious,” Ablin said. “Foreign markets, particularly emerging markets, would take most of the brunt. These are markets that rely more on selling to us than us selling to them.”

Market turmoil could also prevent the U.S. Federal Reserve from raising interest rates as expected in December. As the chance of a Trump upset grew, global markets plunged, with some losses eclipsing the carnage seen after Britain’s shock vote to leave the European Union in late June.

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‘Horribly angry electorate’

“Whatever the outcome, this is a horribly angry electorate,” said Daniel Alpert, managing partner at Westwood Capital LLC in New York. “The markets will tank and then, those around Trump who have reasonable minds will script him with some pablum for the markets and calm them.

“But that is not the issue. The issue is that he cannot fulfill the goals of those who are in his crazy inner circle and, at the same time, truly address the interests of those who have risen up against the Washington consensus.”

The dollar, the Mexican peso and crude oil all plunged as Trump gained ground, with U.S. stock futures tumbling nearly 5 percent, likely wiping trillions of dollars of value off global financial markets, while traditional havens such as sovereign bonds, the Japanese yen and gold all rallied.

Emerging markets such as Mexico and companies related to them such as large U.S. stocks with global exposure are likely to bear the brunt of panic selling, investors forecast.

Mexico a bellwether

The MSCI Emerging Markets index plummeted 3.1 percent, its biggest one-day drop since the June 24 Brexit shock. The Mexican peso is seen as the bellwether for Trump’s chances of a victory as his policies are damaging to Mexico’s export-heavy economy. It plunged more than 13 percent to a record low as early projections put the maverick candidate with no political experience ahead.

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“We’d probably see a selloff in riskier assets, in particular emerging markets assets, particularly the Mexican peso,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, D.C.

“We’re seeing that play out right now,” he said, “and I suspect if you see a Trump win we’d be seeing a continuation of something like that.” (VOA)

Next Story

Investors in Vietnam to be More Cautious While Investing in Tech Startups

Vietnamese Investors More Cautious with Tech Startups

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Investors and entrepreneurs in the communist nation are taking a more critical look at their businesses after seeing others get burned overseas. Pixabay

Vietnamese startups are heading into the new year looking to avoid the mistakes of such companies as Uber and WeWork, which disappointed investors in 2019 for failing to turn a profit after so much buildup.

Investors and entrepreneurs in the communist nation are taking a more critical look at their businesses after seeing others get burned overseas. WeWork, which rents out shared workspaces, was seen as a cautionary tale of a startup that did not live up to expectations and was not profitable.

For years, investors were willing to back losing businesses to gain market share. But now, there is more scrutiny of new investments.

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Ho Chi Minh City is the business hub of Vietnam, where fast economic growth has attracted startup investors. VOA

Benchmarks set

The Vietnam Innovative Startup Accelerator (VIISA) requires its technology startups to meet a list of benchmarks throughout their time in the program.

“Apart from very intuitive selection criteria that all applying startups have to go through, the program has introduced a new development measurement method, which helps us to capture the progress of startups that are accepted into VIISA,” Hieu Vo, a board member and chief financial officer at VIISA, said. “I think this process will bring out the best in each person for the particular business they have founded and committed to.”

Vo said his colleagues sit down with startups when they join the accelerator to discuss key performance indicators, or KPI, that will be set as goals. VIISA also does training for the young businesses so they have quantifiable skills, such as how to structure a business deal, or how to set up their accounting system.

Having metrics and ratings, Vo said, supports “both business performance, as well as personal transformation of founders.”

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Uber was one among those companies that left investors disappointed in 2019. Wikimedia Commons

Founder scrutiny

The founder as an individual has become a point of scrutiny for investors, who used to be more forgiving of an eccentric or aggressive founder, seen as part of the package to have a tech genius head an innovative business. But there has been a backlash among those who think too much permissiveness can damage a business, from the sexual misconduct amid the workplace culture of Uber, to the conflicts of interest in business decisions at WeWork.

It helps to not just think short term and to have an outside perspective, according to Pham Manh Ha, founder and chief executive officer of Beekrowd, an investment platform in Ho Chi Minh City.

“As a first-time founder, it seems impossible for us to look beyond the first six months to a year of our business,” he said, adding that experienced third parties can help businesses take the long view. “They stand outside the trees that are blocking us from seeing the forest.”

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To see the forest, Vietnamese businesses like his are taking a more measured approach. Vietnam has seen an escalation of tech startups, as investors have rushed to put their money to work and take advantage of the economy’s fast growth.

They also remember the dot-com bubble in the United States, and the more recent global tech bubble, two reminders for caution. (VOA)