Foreign ETFs To Win Or Lose On Trump Victory

Global stock market moves right after Donald Trump’s unexpected win made one thing clear that market watchers want the present state of affairs to sustain and not a complete revamp. The theory was true for the U.S. market as well which is why markets started crashing initially on cues of Trump’s victory but finally steadied probably on his reassuring rhetoric on ‘America First’ (read: ETFs to Watch if Trump Makes it to White House).

In fact, several global markets too edged higher on November 9, defying the odds of a crash. All-World ETF iShares MSCI ACWI ACWI was up over 0.3% on November 9. But investors should note that Trump’s uncertain rather arguable stand on trade, immigration and global policies may be detrimental to many foreign ETFs.

Long List of Losers

Nay to NAFTA

Trump has indicated in its campaign that he wants to renegotiate the North American Free Trade Agreement — or totally remove it. The agreement had tied up the U.S., Canada and Mexico for more than two decades. The deal permitted manufacturers and farmers to do seamless business. Now, this agreement may be threatened as Trump intends to bring jobs offshored to countries like Mexico back to America.

This particular issue does not go well with country ETFs like iShares MSCI Mexico Capped EWW and iShares MSCI Canada ETF (AX:EWC) .

Mexico Wall

Trump’s win has by now become synonymous with Mexico’s loss. Mexico is a Trump-unfriendly investment due to his plans of building a wall along the border as part of his immigration strategy and making an unwilling Mexico pay for it (read: 10 ETFs to Watch Today and After The Election).

Apart from the wall issue, restriction on outsourcing makes Mexico ETF more vulnerable. Several auto companies have manufacturing hub in that country. Speculation is rife that Trump may impose huge tariffs on imports from that country. Mexico peso slumped over 12% to a record low on cues of Trump’s victory. Mexico ETF iShares MSCI Mexico Capped EWW was down over 8.5% on November 9.

Other Asian Outsourcing Hubs

China and Taiwan are among the other outsourcing hubs that may fall prey to Trump’s outsourcing policies. Higher tariffs on imports or likely loss of manufacturing jobs may put pressure on China ETFs like iShares China Large-Cap FXI (down 2.4% on November 9) or Taiwan ETFs like iShares MSCI Taiwan ETF EWT (down over 3.4% on November 9) (see all Asia-Pacific (Emerging) ETFs here).

Trans-Pacific Partnership to be Terminated?

The Obama administration has been negotiating the Trans-Pacific Partnership or pan-Pacific trade agreement among 12 nations of Pacific Rim. Countries like Japan and Australia are part of this. But Trump finds this deal not in the best interest of America.

So, TPP members are likely to suffer if the agreement is not passed (of which there is a high chance). So member ETFs like iShares MSCI Australia EWA (down 0.7% on November 9), iShares MSCI New Zealand Capped ENZL (down 3.3%) and iShares MSCI Singapore ETF (EWS) may get hurt. In fact, most of America’s Asian friends like iShares MSCI South Korea Capped EWY (down over 4.5%) may be hassled in the coming days (read: Why Korea ETF Investors Will Pay for Samsung (KS:005930)'s Mistake).

Europe in Danger?

Trump views that several American cronies are benefiting from partnerships like trans-Atlantic efforts, be it on the security front or trade. In fact, The North Atlantic Treaty Organization (NATO) is likely to be in trouble in Trump presidency. Whether the U.S. can be loyal to the defense of countries that are unable to invest sufficiently in their militaries is a big question now. Trump, in fact, proposed an easier attitude toward Russia and advised being more hostile against terrorism. Europe ETF Vanguard FTSE Europe ETF VGK will thus be under watch in the coming days (see all Europe ETFs here).

Beneficiary

Among all these uncertainties, Russia is likely to win on Trump’s victory as he indicated his approval for Putin. Notably, the relationship between the U.S. and Russia was stressed when the latter annexed Crimea from Ukraine in early 2014. But now the ice may start melting. So, Russia ETFs like VanEck Vectors Russia ETF RSX and VanEck Vectors Russia Small-Cap ETF RSXJ may be poised for gains if oil price remains stable – a key factor to notice before investing in this energy-rich economy (read: 3 Country ETFs Soaring on Hopes of Oil Output Curb).

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