Elections can have a profound impact on a country’s future, so it is no surprise that as investors in frontier markets they are events that need to be closely monitored. We made a list last year, and this year is projecting to be even more important for election watchers.
This year there are over 30 presidential or general elections around the world, but here are 6 important ones to watch for:
Uganda – General Election – February 2016
This election was already held on 18 February 2016, and the incumbent Yoweri Museveni of the NRM won the election with over 60% of the vote. Given that the election has already happened, and the reaction in the Ghana Stock Exchange Composite Index was muted afterwards, why does this election still bear watching?
It’s because the election has been marred by allegations of fraud and lack of transparency by voting watchdogs, and the likelihood of instability in the region has increased. In one glaring example of an unfair election process, the main opposition leader was arrested several times before the election and remains under house arrest. This means that despite the incumbent winning, political stability is likely to be reduced in the near future as the populace comes to grips with the results.
Peru – General Election – April 2016
Peru’s general election will be held on 10 April 2016, with the incumbent President Humala unable to run due to term limits. The clear front-runner is Keiko Fujimori, daughter of ex-president Alberto Fujimori who actually fled to Japan during his term amidst corruption allegations and is currently in prison for a long list of offenses. Despite this lineage, Keiko is popular and narrowly lost in the 2011 elections when the vote went to a run-off.
The election has already entered into controversy with the second most popular candidate, Julio Guzman of the TPP, finding resistence to his candidacy from the electoral court, which has ruled against his presidential campaign. Another tribunal will now rule on whether his presidential campaign needs to be scrapped entirely, undercutting the momentum he’s gained of late.
One quirk of Peruvian politics is the lack of strong political parties, leading to candidates coming out of nowhere to gain support and subpar candidates in general. For more information on the current election we recommend this article by the Economist.
Philippines – Presidential Election – May 2016
The Philippine presidential election is set to be held on 9 May 2016, with change coming since incumbent President Aquino is unable to run again due to term limit rules. He’s been popular as he has led the Philippines to a time of relative prosperity with the country becoming one of the fastest growing in Asia. Having come from a political dynasty and emerging late in the 2010 Presidential election to become the representative for the Liberal party, Aquino’s departure has been smoothly handled for the upcoming election.
Mar Roxas, the man who was in line to lead the Liberal Party before Aquino stepped in, is once again campaigning for the presidency despite losing in the Vice President elections in 2010. He already has Aquino’s endorsement and has already resigned as Interior Secretary to focus on his campaign.
His biggest challenger will be Jejomar Binay of the United Nationalist Alliance, the man who defeated him in the Vice Presidential election in 2010 amid some controversy. Binay has also won endorsements from a number of senior figures, among them the boxer Manny Pacquiao, who is running for senator under Binay’s party.
Three other candidates are running: Miriam Santiago, Rodrigo Duterte, and Grace Poe, so the election promises to be an eventful one and something to watch closely over the next few months.
United Kingdom – Brexit Referendum – June 2016
On June 23, the UK will hold a referendum on whether they want to leave the European Union, aka “Brexit”. Currently betting markets are expecting the UK to stay with the European Union, since an overwhelming majority of experts believe that leaving will be disastrous for the UK (Boris Johnson notwithstanding).
Both the Pound and Euro have fallen precipitously along with local stocks since the threat of Brexit increased. For frontier markets in Europe, the Brexit referendum and all the headlines up to that event will have an impact on regional stability. Countries with a large number of foreign emigrants to the UK, such as Poland, may have the most to lose if Brexit were to actually occur.
Ghana – General Election – November 2016
Ghana’s general election is set to be held on 7 November of 2016, pitting the incumbent John Dramani Mahama of the NDC against Nana Akufo-Addo of the main other party, the NPP. The election comes at a critical juncture in the country as the economy has faltered due to the commodity price collapse.
Ghana is heavily reliant on commodity exports with Gold, Cocoa, and Oil accounting for 80% of its exports – its Economic Complexity Ranking, a measure of how diversified the economy is, ranked it at 100 out of 125 countries in the world. As a result of the commodity collapse, its deficit has ballooned, budgets have had to be totally revised, and GDP growth has fallen to below 5% while inflation was still 17.7% in 2015. This is a long drop from just 2013 when it was one of the fastest growing economies in the world.
Because of the economic turmoil, the election in November is expected to be very tight and there is fear of overspending and promises made to secure votes – a common practice in previous elections.
United States – Presidential Election – November 2016
We’re already deep in the election fever of the Republican and Democratic Party’s nomination process, but the general election is on 8 November 2016 this year. We won’t spill much more digital ink on what promises to be a very long race, but at the moment the market impact on the election results is actually quite neutral.
On the Republican side, the impact on the stock market should be negligible depending on who the eventual nominee is. Between Trump, Cruz, and Rubio, they’re all perceived as business friendly even though their relative xenophobia (especially with Trump), may have a negative impact on foreign stock markets (especially Mexico or Cuba).
On the Democrat side, Clinton would be a relatively business-friendly status quo selection. Sanders would probably be seen as a very business-unfriendly candidate that could lead to some selling in the stock market, especially for financial stocks.
Either way, the election will be followed as closely as any election ever has before, and it is sure to be a long road until November. As the most powerful nation on Earth, the impact of the election on US stock markets would be felt around the world, even in some frontier markets.