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Anticipate a ‘dramatic fall’ in markets if U.S. election final result is contested, warns Mark Mobius

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Mark Mobius, founding companion of Mobius Capital Companions, speaks on the 10th version of the Bosphorus Summit in Istanbul, Turkey.

Serhat Cagdas | Anadolu Company | Getty Photos

SINGAPORE — A contested final result within the U.S. presidential election might trigger a “dramatic fall” within the inventory markets, veteran investor Mark Mobius warned on Friday.

“That is an actual concern and an actual drawback,” Mobius, founding companion of Mobius Capital Companions, advised CNBC’s “Road Indicators Asia” in response to a query on the implications of a disputed election, wherein the eventual winner will not be finalized till weeks or months after the Nov. three vote.  

“If that takes place, then we’re actually in bother. The markets won’t prefer it and you will see an actual correction or perhaps a dramatic fall out there. In order that’s a really, very massive drawback,” Mobius mentioned.

Such an final result might occur if a candidate deemed to have misplaced the election refuses to concede, or if he questions the legitimacy of the outcomes. U.S. President Donald Trump has repeatedly declined to say whether or not he would settle for the election outcomes, which gave rise to issues of a messy transition of energy if he loses to Democratic presidential candidate Joe Biden.

The markets won’t prefer it and you will see an actual correction or perhaps a dramatic fall out there. In order that’s a really, very massive drawback.

Mark Mobius

founding companion, Mobius Capital Companions

How a lot markets would fall will depend upon how lengthy the dispute lasts, Mobius mentioned. He defined that if the dispute is taken to the Supreme Court docket, the method of figuring out a winner could possibly be “drawn out” and create extra uncertainty — one thing that markets “hate.”

To hedge in opposition to the dangers of a contested election final result, Mobius mentioned he is invested in firms which are “considerably proof against financial downturns.” Meaning companies with sturdy stability sheets and people that may keep or improve demand for his or her services and products, he defined.

Trump win extra ‘favorable’

Normally, Mobius mentioned a Trump win is a extra “favorable” final result for the markets.

“It is actually all about tax,” the investor mentioned.

“As you recognize, Trump is promising one other main tax lower. The Democrats haven’t mentioned that, they plan to lift tax on the so-called wealthy individuals and on companies. So, that’s actually the large, massive concern going ahead,” he added.

U.S.-China tensions

Exterior of the U.S., Mobius — an professional on investing in rising markets — mentioned Asia stays a vibrant spot for traders.

He mentioned he is been investing “fairly closely” in Taiwan and South Korea, significantly in firms that offer the “nuts and bolts” of expertise — reminiscent of semiconductors and built-in circuits. Demand for these parts will develop together with better adoption of expertise, he mentioned.

“Apple wants the gear, they want the chips to provide what they’re producing and that is what we’re . We’re wanting on the parts to an iPhone or an iPad, or parts to any of those gear that these individuals use,” Mobius defined.

A number of of those part suppliers are uncovered to the tech battle between the U.S. and China. Manufacturing of tech components are carried out throughout a sophisticated community of economies and firms. So non-American and non-Chinese language corporations might additionally get entangled in Washington’s resolution to limit Chinese language corporations from doing enterprise within the U.S.

However Mobius mentioned he is not “too apprehensive” about U.S.-China tensions.

“At the moment, nations, no matter any commerce restrictions and so on., they nonetheless should commerce. And this will probably be true of the U.S. and China,” he mentioned.

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