OVERVIEW

• The 2024 US election pits Harris' progressive continuity against Trump's "America First" stance. With swing states as decisive battlegrounds, voters are divided on key issues, creating a highly unpredictable race.
• Trump agenda prioritises low taxes, protectionism, and deregulation while Harris pushes for higher corporate and wealth taxes, targeted trade restrictions, and worker protections.
• Polls and betting markets slightly favour a Trump win, but our base case expects a Harris victory. Though Trump's slight lead in most swing states supports his position, strong economic fundamentals - disinflation, income growth, and a robust labour market - favours Harris presidential win. In the debate, Harris' performance outshone Trump's, potentially influencing undecided voters.
• Regardless of the winner, Malaysia's trade and investment prospects would be affected - Trump's protectionism could challenge existing trade relations, while Harris may strengthen US-ASEAN trade ties. In either scenario, we believe Malaysia stands to benefit from shifts in trade flows and increased regional investment.
• A Harris win could weaken the USD in the near term, stabilising the DXY to around 102-103, supporting the ringgit as Fed rate cuts proceed and policy continuity prevails. Our base case, a Harris victory without a decisive sweep, assumes the current economic conditions persist, with USDMYR forecast at 4.25 by end-2024 and 4.10 by end-2025.
• A Trump presidency could boost USD and fuel inflation, impacting Fed policy and emerging currencies, including the ringgit. These factors could constrain Fed rate cuts to only around 4.0-4.5% by 2025, leading to a USD boost that might drive USDMYR to 4.48 by end-2024, with a moderate recovery to 4.37 by end-2025.
• In the short term, Harris' victory could lower US Treasury (UST) yields, benefiting Malaysian bonds. Trump's win might heighten volatility, limit Fed rate cuts, and push yields higher. Both scenarios suggest a persistently high US deficit, influencing investor sentiment and bond market dynamics in Malaysia.

CONTEXT

• The US 60th quadrennial presidential election on November 5, 2024, will determine the next president based on each state's popular vote with a minimum of 270 out of 538 electoral votes needed to win. Kamala Harris, the sitting vice president, launched her campaign for president on July 21, 2024, after President Joe Biden withdrew and endorsed her bid.
  • Kamala Harris campaign slogans "A New Way Forward" and "When We Fight, We Win" project progress, optimism, and a future-focused approach, contrasting with Donald Trump's "Make America Great Again," focused on restoring past values. Polls indicate a tightly contested race, particularly in swing states, where both candidates are neck and neck.
  • Key issues center on the economy, healthcare, and immigration, with voters starkly divided. Harris champions economic continuity and social policy, while Trump emphasises "America First" and anti-immigration stances. In swing states like Arizona and Nevada, voters are split on whether candidates' policy stances or leadership traits matter more, with polls showing narrow margins and little room for error. As election night approaches, turnout and late decisions could tip the scales in either direction, setting up a suspenseful and unpredictable finish.

Source: Kenanga Research - 1 Nov 2024