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Monday, November 07, 2016

US Election: The Likely Outcome

This morning, the whole world breathed a sigh of relief when the US Federal Bureau of Investigation (FBI) cleared Hillary Clinton from facing charges for keeping a personal email account while she served as Secretary of State. Even before the announcement, her poll numbers had recovered after dipping earlier on announcement of fresh investigation in possible new emails found in her personal aide's computer.


US Presidential Polling Averages

Just before the latest new emails problem surfaced, many pollsters were assigning a probability of above 80% of a Hillary Clinton victory. One of the more aggressive polling group, Sam Wang's Princeton Election Consortium has even assigned a probability of 99% for Hillary Clinton win. Despite this - which will translate to a low probability of a win for her opponent, Donald Trump - the markets world-wide were so fearful of the unpredictable consequences of a Trump Presidency that they went into a steady drop in the past 2 weeks.

 
Chart 1: DJIA's weekly chart as at Nov 4, 2016 (Source: Stockcharts.com)


Chart 2: HSI's weekly chart as at Nov 4, 2016 (Source: Stockcharts.com)


Chart 3: FBMKLCI's weekly chart as at Nov 7, 2016_3.30pm (Source: Shareinvestor.com)

Having watched the US election this cycle for a good 6 months, I feel that we can go with the pollsters computation of a victory for Hillary Clinton. Betting professionals are now assigned an odd of Hillary winning the Presidency of 2/7, which means that a RM7.00 wager would earn a payout of RM2 (here).  

Based on the above, I feel that you should avoid selling in the current depressed market. Even though the market has recovered somewhat today, you should hang onto your stocks. For those who are more bullish and willing to wager a punt, you may consider trading on HSI's call warrants. I have listed down 5 HSI's call warrants for your selection. I prefer HSI-C48 & HSI-C62. Good luck!!


Table: HSI's selected call warrants

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