EM unprepared for Trump as candidate divides IMF meetings
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Emerging Markets

EM unprepared for Trump as candidate divides IMF meetings

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The emerging markets world is divided over Donald Trump with leading investor Mark Mobius seeing him as a potential boon for economies but Sri Lanka’s foreign minister says he talks nonsense. But whoever is right, one thing appears true – no one is prepared for President Trump

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Danish Siddiqui / Reuters

With exactly a month to go until the polls open in the most important American presidential election in living memory, emerging market policymakers and economists appear dangerously unprepared for and vulnerable to the possibility of Donald Trump entering the White House. Gorky Urquieta, co-head of emerging market debt at investment manager Neuberger Berman, said that at the moment, the Mexican peso was the only market that is reflecting a “Trump risk”. “This suggests that markets are underprepared for a Trump victory [that] would inevitably cause disruption, given the uncertainty of what a Trump administration would ultimately do,” he said.

One reason may be that just like American voters, emerging market experts, from policymakers to investors to ministers, either love or hate The Donald, seeing him as the saviour of the developing world — or as a bringer of darkness and doom.

Mark Mobius, an emerging markets fund manager at Franklin Templeton Investments, and a long-time admirer of the potential and profits to be found in the developing world, was full of praise for the man who would be America’s first Celebrity-in-Chief.

“A Trump presidency would mean a much more flexible environment for emerging markets and their relationships with the US,” the investment manager said. “He is a businessman, a negotiator, and a dealmaker, and this would be very appropriate for many countries in the emerging markets world, who would like to make bilateral agreements with America.”

Mobius praised Trump’s unpredictability in dealing with the developing world, a facet of the man that many see as less an asset than an outright flaw. “The mere fact that Trump flew down to Mexico unexpectedly is an example of the kind of thing he would most likely do.”

LEFT HAND, RIGHT HAND

Mobius also dismissed criticism of Trump’s plans to build a 10 foot high barrier on the US-Mexico border, noting that a “wall is a very lucid picture” for many American voters. “In the US, people are being hurt by Mexican imports and drugs.”

Others, unsurprisingly, saw a Trump victory as an arrow in the eye for leaders in the developing world.

Sailesh Lad, senior portfolio manager at Axa Investment said a victory for the Republican Party nominee next month would “create terrible uncertainty across all markets. There is an argument that checks and balances would prevent him being too radical, but the problem is that he is so unpredictable. What will he do with [Russian president Vladimir] Putin? How will he act in the Middle East? As a fund manager, of course I am worried.”

But most of all, there is the concern that victory would cause instability across global markets. “With Trump, the right hand doesn’t know what the left hand is doing,” said Sri Lanka’s finance minister Ravi Karunanayake. “He talks up protectionism to one audience, then triumphs free trade at the next event. What he says does not make sense.”

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