The incumbent, a battle-hardened Alexis Tsipras, vows to lead a revived and renewed government, unshackled by the Troika. Though promising electoral giveaways, in reality, Syriza has limited scope for populist adventures and the clock is ticking. In fact, under the capable tutelage of finance minister, Euclid Tsakalotos, as well as the urgings of the Troika, Greece has run a tight ship. They are unlikely to be rewarded for their efforts. The recent no-confidence vote, triggered by the Macedonia Prespa agreement, has had a bruising impact on Syriza, costing them some precious Nationalist/nativistic votes at home while boosting Tsipras’s credentials, in some external circles, as an international statesman. The deal enhances security in the Balkans, will accelerate planned projects for energy and transport networks, and will upgrade Greece’s geo-political status. Will Tsipras win a Nobel Prize and lose the election? The unlikely reelection of Syriza with support from a smaller party -as in 2015- would be seen at best as a market neutral event. If New Democracy were to “win”, and they are extending their lead in the polls, with or without support of a smaller party, markets will rally as Syriza is identified as a less-friendly market force and some of their more ideological policies have irritated swathes of the population. New Democracy may represent, according to some commentators, a much-needed change of scene, reviving a suppressed enterprise culture, raising “animal spirits”, and aggressively tackling the Banking Sector imbroglio and accelerating privatisation. We do not though believe, that either Syriza (signed-up to privatisation as well) or New Democracy would alter the economic landscape much. They may both need another party as in 2015 to reach a majority. A coalition government led by the left or right would have a limited impact, reducing ideological content of respective parties. Whoever is elected has to follow a fairly prescriptive agenda within a pro-EU framework given Greece’s modest scope for expansionary fiscal policy amidst creditor demands and requirements. Is Greece in fact Europe’s first post-populist narrative? That will be for New Democracy to prove.
This insight is Part 5 of a six-part series on 2019 elections in which we evaluate key polls and their potential to re-shape the economic outlook and investment risk profiles. These six markets - Thailand, Indonesia, India, South Africa, Greece and Argentina - collectively represent one-quarter of the world’s population and more than $5 trillion in GDP. We review distinct domestic challenges as well as campaign pledges by incumbents (and their challengers) aimed at addressing them. We also humbly assign probabilities to baseline and alternative scenarios and their implications for macroeconomic outlook and investments.
Even amidst their diversity, these six jurisdictions display some remarkable similarities: subdued economic momentum, bouts of market volatility, signs of voter disquiet and/or disillusionment and an opposition looking to capitalize on all of these forces. In a bid to revive the ‘magic’ that had helped to install their administrations, many incumbent governments are now on the defence - either changing tack (and dialing back past policies) or attempting to convince voters to let their policies work their magic.
Summary - Election timeline, political risk classification and market implications:
Election date (2019) | Degree of uncertainty | Baseline scenario (%) | Market implications | Market view | |
Thailand | 24 March | Medium to High | Elections are held and pro-junta PP keeps control (65%) | Medium to Low | THB: Stable unless political uncertainty erodes confidence, tourism ThaiGB: Stable CDS: Gradually wider SET: Energy, materials and capital goods favoured. More upside in non-bank financials vs financials. |
Indonesia | 17 April | Low | Jokowi re-elected, PDIP coalition intact (75%) | Medium | IDR/IndoGB: Constructive INDON: Stable JCI: prefer energy, materials, services, capital goods, transportation,and telco.Cautious on main banks. |
India | April to May | High | BJP/NDA retain power, with smaller majority (60%) | High | INR/IGB: Steeper curve (bearish long-end) CDS: Wider on potential negative sovereign outlook Nifty: Cautious healthcare and banks. Overweight IT. |
South Africa | 7-31 May | Medium to High | ANC retains power (80%) | High | ZAR/SAGB: Constructive SOAF: Constructive JSE Top40: Constructive on Financials. Cautious on consumer. |
Greece | 20 October | Medium to High | ND returns to power (52%) | Medium to High | GGBs/CDS: Scope to tighten vs periphery peers AEX: Banks may revive though European credit markets need to be watched. Energy, Infra, and utilities offer opportunity. Gaming too. |
Argentina | 27 October | High | Cambiemos retains power (52%) | High | ARS/Argtes: Peso richly valued but slower inflation positive for Argtes ARGENT: Volatile Merval: Volatile. Optically cheap valuations signify risk and weak growth. Hydrocarbons could be a winner. Cautious on consumer. |
Source: Authors' assessment
Please refer to other insights in this series:
This series is co-authored by Paul Hollingworth at Creative Portfolios and Virgil Fernandez Esguerra.
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