Batanai Matsika “Maybe I’ll have to leave the country.”— President Donald Trump pondered his future plans if he were to lose to Joe Biden during a campaign rally in Georgia.
The upcoming US presidential election set for November 3, this year is indeed a major theme for global markets. American voters will have to decide whether Trump remains in the White House for another four years.
The Republican president is being challenged by Democratic Party nominee Joe Biden, who has been in US politics since the 1970s.
As election day approaches, polling companies are attempting to gauge the mood of the nation by asking voters which candidate they prefer.
Biden has been ahead of Trump in most national polls since the start of the year. He has hovered around 50 percent in recent months.
According to The Economist, Biden has held a wider lead over Trump in the polls than Clinton did in 2016 as illustrated in the graph.
Morgan & Co Research contends that a Biden victory is associated with a weaker dollar and better relative performance for equities outside the US.
We highlight that the US-China trade war has dominated headlines since Trump took office. The Trump administration has pulled out of several trade deals, introduced a new trade deal with
Canada and Mexico, and levied hundreds of billions of dollars in tariffs on Chinese companies.
Trump has also demanded that Chinese firm Bytedance, owner of the app TikTok, sell its US operations, banned the sale of electronics components to Chinese telecom firm Huawei, and threatened to delist Chinese companies from US stock exchanges.
If Trump is re-elected, there are also fears he could start a trade war with Europe, as he has previously threatened to do.
In our view, this stance will lead to dollar strength which translates to weaker trading-partner currencies.
For Zimbabwe, the concern is around rand weakness. A Trump victory could trigger a stronger US dollar and by translation, a weaker South African rand. SA is Zimbabwe’s major trading partner, and any changes in its currency in relation to the US dollar filters through into Zimbabwe.
A falling rand also makes Zimbabwean exports more expensive against competing products in SA. Worse still, Zimbabwean companies will suffer from cheap imports as South African products with lower prices muscle out locally-made products.
We have identified ZSE-listed companies that could be negatively impacted by a weakening rand as a result of both imported and smuggled goods.
These include Axia (Household goods), ART (batteries and stationery), AfDIS (spirits), BAT Zimbabwe (cigarettes), Dairibord (milk products), NatFoods (food), OK Zimbabwe (food), Powerspeed (electricals), Edgars (clothing), NTS (tyres), Star Africa (sugar), Turnall (building materials) and Truworths (clothing).
This dynamic also demonstrates the need for businesses in Zimbabwe to focus on improving production efficiencies so as to remain competitive in the new global economy. All in all, we think the 2020 US presidential election could increase volatility more than usual.
Trump has proved to be a bigger “market mover” than his predecessors like Barack Obama. There is also the likelihood of a contested election (i) if Trump loses and (ii) if the results are close.
That said, a one or two-month dispute will still impact on social and economic volatility.
Investors on our markets should remain overweight in regional plays (SeedCo and Simbisa Brands) and export-oriented counters like Padenga Holdings and Hippo.
● Matsika is head of research at Morgan & Co, and founder of piggybankadvisor.com. He can be reached on +263 78 358 4745 or batanai@morganzim.com / batanai@piggybankadvisor.com
