In Asia, reactions were positive. Analysts expressed bullish outlooks about the impact of an Obama presidency on markets and the global credit crisis. Asian stock markets closed largely higher Wednesday with JapanÆs Nikkei 225 leading the pack with a 4.46% gain to 9,521.24 points. Hong KongÆs Hang Seng Index rose 3.17% to 14,840.16 points and SingaporeÆs Strait Times index was up 2.14% at 1,868.82. Only India, where investors are concerned that ObamaÆs tough stance on outsourcing will spell trouble for one of the countryÆs biggest service export industries, ended down. The Mumbai Sensex index closed 4.81% lower at 10,120.01.
While it is said that the election of a Democratic president is market positive, the Dow Jones opened Wednesday 8.68 points below its 9,625-point close on Tuesday night and by the end of the session had lost 5%.
Few believe the initial market gains in Asia too will be long lasting. ôItÆs going to be a short-term honeymoon,ö says CalyonÆs head of global FX strategy, Mitul Kotecha. ôPoliticians, both McCain and Obama as well as Congress, have all had their eyes on elections and that has left the economy on a bit of a back burner. I think now there is a huge expectation that Obama will support a big fiscal stimulus. But the reality is the economic situation is dire.ö
The next steps for president elect Obama will be to select a cabinet. Key appointments will include treasury secretary and secretary of state, one to fix the economy and the other to repair AmericaÆs image abroad. For treasury secretary, Obama must select someone who both understands Wall Street but is not a member of the Wall Street establishment behind the financial crisis. For secretary of state, he will be looking for someone to shift America away from a unilateral to a multilateral position on global issues.
ôThe new administration must come up with the people first before they come up with the package,ö says Nicholas Kwan, Asia regional head of research at Standard Chartered.
With a new focus on the economy, many expect the US Congress to pass a second economic stimulus package. Under the influence of president-elect Obama, this second package could be as big as $150 billion and is likely to focus more on cities and states û boosting infrastructure, education and healthcare spending û than on individuals. Such a stimulus is expected to have a longer lasting positive effect on consumer confidence and spending, two factors that directly impact Asia-US trade flows.
Last FebruaryÆs $168 billion stimulus package focusing on taxpayer rebates and tax breaks for businesses was largely seen as ineffective.
ôThe combination of the change in presidency and a stimulus package that focuses more on injecting spending into the economy will ultimately be a positive,ö says Glenn Maguire, Societe GeneraleÆs Asia-Pacific chief economist. ôThe change in government and an additional stimulus package should be enough to bolster consumer sentiment and if consumer sentiment starts to stabilise then thatÆs overwhelmingly a positive for Asia.ö
Any boost to consumer sentiment coming out of the election will, however, take time to have an effect in Asia. ôOctober and November will be acutely bleak months for the world economy,ö says Maguire. ôAs we go through Q4 and into Q1 most of the developed economies in the world, including the US, will either be in recession or posting near zero growth. With the lag effect, Q1 and Q4 are going to be quite weak in Asia with a major pick-up likely not starting until the second half of 2009ö.
Reaching out to the rest of the world is seen as a must for president-elect Obama. Speaking in Hong Kong Wednesday night, former secretary of state Colin Powell said: ôPresident-elect Obama understands the importance of [the US] relationship with China, in its political dimension as well as its economic dimension. China, the US and other parts of Asia, are in some economic difficulties and we have to work through these economic difficulties. We are all connected, the international economic system is one system, and everybody has to participate in that system.ö
When asked, Powell denied any interest in a position in government but said that if called upon he would be ômore than happyö to give advice to the Obama administration.
ObamaÆs election represents a new day for the US and the world. General Powell put it correctly when he said that the US leadership has moved into the hands of a new generation. That new generation now has the chance to make the change that over 60 million Americans seek.