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US election expected to sway Tokyo market next week

The market fell for five consecutive days, with the Nikkei ending below 23,000 for the first time in two months on Friday. (AFP)
The market fell for five consecutive days, with the Nikkei ending below 23,000 for the first time in two months on Friday. (AFP)
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30 Oct 2020 09:10:11 GMT9
30 Oct 2020 09:10:11 GMT9

TOKYO: The US presidential election is expected to cause wild swings on the Tokyo stock market next week.

This week, the benchmark Nikkei average of 225 selected issues listed on the Tokyo Stock Exchange’s first section lost 539.46 points, or 2.29 percent, to end at 22,977.13 on Friday.

The market fell for five consecutive days, with the Nikkei ending below 23,000 for the first time in two months on Friday.

The market was weighed down by concerns over the surges in the number of novel coronavirus cases in Europe and the United States, as well as uncertainties over the outcome of the presidential election set for Tuesday.

Next week, the Nikkei average is expected to move mainly between 22,500 and 23,700, analysts and brokers said.

“The election is pretty much the market’s only focus next week,” said Maki Sawada, vice president of Nomura Securities Co.’s Investment Research & Investor Services Department.

Echoing her, Yutaka Miura, senior technical analyst at Mizuho Securities Co., said, “It will be like a four-day weekend for players as they are expected to refrain from active trading on Monday ahead of the election.”

The Tokyo market will be closed Tuesday for a national holiday.

“We won’t know who will win the race until the results are announced,” especially since current US President Donald Trump secured an unexpected victory in the previous election, Kazuo Kamitani, Nomura Securities Co.’s senior associate at the Investment Research & Investor Services Department, said.

“The biggest risk for the market will be that the winner is not confirmed for a while,” Nomura Securities’ Sawada said.

Democratic candidate Joe Biden is reported to be ahead of Trump in the race. Criticizing mail-in ballots, which are expected to increase in the upcoming election, Trump intends to take the election to the Supreme Court if he loses due to the ballots.

“If it takes time to determine the next president, heightened policy uncertainties will likely drive the Nikkei down,” Sawada warned. 

“On the other hand, if the winner is fixed shortly after the election, the Nikkei will rise,” Miura said.

“Regardless of who wins, the market will be underpinned by expectations for a fresh US coronavirus relief package,” Sawada said.

Meanwhile, Ichikawa said that investors will also be watching closely over which party will take control of the US Senate, which will also hold elections in line with the presidential poll.

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