Biden’s stimulus package could lure money from Asia, China to US: JPMorgan

SINGAPORE – Emerging markets in Asia could fall victim to the latest $ 1.9 trillion Covid relief plan from US President-elect Joe Biden.

That’s according to James Sullivan, head of Asia ex-Japan equity research at JPMorgan.

“Most investors were very positive about Asia and emerging markets versus the United States” before details of the latest bailout were announced, Sullivan told CNBC’s “Street Signs Asia” Friday.

“We have seen more than 18 consecutive weeks of inflows of funds into Asia outside of Japan over the past two months,” he said, adding that it is “very likely” that funds will start to turn out of the way. emerging Asian markets. return to the United States due to the stimulus to economic growth from Biden’s plan.

Biden on Thursday revealed the breakdown of his proposed package, titled American Rescue Plan, which includes measures to support families and businesses until vaccines are widely distributed. The plan includes stimulus checks as well as unemployment assistance.

Sullivan said JPMorgan previously forecast a two percentage point slowdown in US GDP due to the lack of fiscal stimulus.

“We included in our forecasts a $ 900 billion fiscal stimulus plan, which led to a 2 percentage point slowdown to a 70 basis point surge in US GDP,” he said. stated about the previous forecast.

With Biden’s $ 1.9 trillion plan now more than double the amount JPMorgan expected, the analyst said it would be a “positive surprise” to the market as well as to overall levels of economic growth in the United States. United.

“The fund flows from investors in Asia have been very aggressive over the past couple of months, you might start to see a reversal,” the analyst said. “I would say we may be halfway to trade at this point.”

Chinese markets – among the best performing regionally in 2020 – could be among the first to be affected by this change, Sullivan predicted.

“You will likely see the aggressive 2020 outperformers being a source of funding,” he said. “China would be very present there”.