Joe Biden’s stimulus plan could work for him, as the funds could leave Asian markets and return to the United States.
Emerging markets in Asia could become victims as a result of US President-elect Joe Biden’s latest Covid-19 relief plan worth $ 1.9 trillion.
That’s according to James Sullivan, director of Asia ex-Japan equities research at JPMorgan.
“Most investors were very positive in Asia and emerging markets relative to the US.” Before details of the latest rescue package were announced, Sullivan told CNBC’s “Street Signs Asia” on Friday.
“We have seen more than 18 consecutive weeks of fund inflows into Asia excluding Japan over the course of the past few months,” he said, adding that it is “very likely” that the funds will begin to rotate out of emerging markets in Asia back to the US as a result of the economic growth boost of the Biden plan.
What is Joe Biden’s plan?
Biden on Thursday revealed the breakdown of his proposed package of his, titled American Rescue Plan, which includes measures aimed at supporting families and businesses until vaccines are widely distributed. Biden’s plan includes stimulus controls and unemployment assistance.
Sullivan said that JPMorgan previously forecast a two percentage point drag in US GDP as a result of the lack of fiscal stimulus.
“We had included in our forecast a $ 900 billion fiscal stimulus package, which drove a move from a 2 percentage point drag to a 70 basis point boost in US GDP,” he said of the previous forecast.
Somagnews was informed that, with Joe Biden’s $ 1.9 trillion plan now reaching more than double the amount expected by JPMorgan, the analyst said it will be a “positive surprise” for the market, as well as for general levels of economic growth in the United States.
“Investor fund flows into Asia have been very aggressive over the course of the past few months, you could start to see it reverse,” the analyst said. “I would say that maybe we are in the middle of the exchange at this stage.”
China’s markets, which are among the best performing regionally in 2020, could be among the first to be affected by this shift, Sullivan predicted.
“You will likely see the aggressive best results of 2020 as a source of funds,” he said. “China would be very front and center there.”