Thursday, September 27, 2012
Global Elections Update.
The upcoming November 6 US presidential election likely catches no one unaware. But it’s critical to not ignore the rest of the world. Politics are a critical driver of stock returns (along with economics and sentiment)—and we live in a global investment world. Here’s an update on major upcoming elections abroad.
On September 12, Dutch voters rejected euro-skeptics, sticking with the pro-euro parties that led their last coalition government. Should previous Prime Minister Mark Rutte’s liberal VVD party manage to form a coalition with the Labour Party (PvdA) again, it would mark the first major elected body that supported the euro, dealt with contentious budget cuts and hiked taxes to survive a popular election.
Restricted to a single five-year term by the South Korean constitution, the pro-business President Lee Myung-bak will be termed out February 2013. Elections for his successor will be held on December 19. The outcome likely has some impact on various measures Lee undertook during his presidency, including the country’s stance on dealing with a transitioning North Korea, ties with the United States (including a once-contentious free-trade pact) and the country’s currently accommodative business environment.
Despite undergoing numerous operations for cancer and significant speculation about his general health, President Hugo Chavez is seeking a third consecutive six-year term at the October 7 “elections.” Given his near-dictatorial powers, Venezuela’s election is more political theater than anything else. However, his health continues to be particularly concerning to international-watchers, given he has never ceded power or named a successor.
Not so much an election as much as a power transition, China’s October Communist Party Congress is still worth watching. President-in-waiting Xi Jinping went missing for several weeks earlier this month. Since the party tightly controls the media, little information was released as to his whereabouts, leading to rampant speculation on Chinese micro-blogs and in Western news outlets. However, Xi reappeared late last week, putting some rest to the rumors. Regardless, given their history of relatively smooth (at least, as far as external observers are allowed to see) power transitions, it’s likely this one follows suit, with the party continuing to take measures to liberalize financial markets and boost stimulus measures this year.
Unless a snap election is called before then, the next Italian general election will be held in April 2013 to determine the members of its two houses of parliament. Although Italy may make significant debt and deficit reduction and growth reform progress between now and then under technocrat Mario Monti, expect much consternation over any incoming government’s commitment to maintaining that progress.
Following 2009’s contested presidential election, where many Western countries expressed concern over irregularities in incumbent Mahmoud Ahmadinejad’s victory, the June 2013 presidential election will likely be closely watched globally. Though the President of Iran is the highest elected official by direct popular vote, he is far from the most powerful leader in the country and holds little control over foreign policy and the military. That distinction falls to the Supreme Leader of Iran, currently Ali Khamenei—so major changes in the country, even with possible presidential turnover, are unlikely.
Following passage of a bill to raise Japan’s consumption tax from 5% to 10% earlier this year to rein in the ballooning fiscal deficit, current Prime Minister Yoshihiko Noda vowed to call a snap-election by autumn 2013. The tax legislation, regional free-trade pacts and ongoing conflict with China over disputed island territories have somewhat fractured his party and hurt his popularity—opening the door to perhaps the eighth Japanese Prime Minister in as many years and an ongoing political morass in the country.
Perhaps the most important election to the ongoing survival of the euro, Germany holds parliamentary elections in September 2013. So far, German Chancellor Angela Merkel and her Christian Democratic Union / Social Democratic Party coalition have managed to drum up strong support from the electorate in support of the euro. However, should German economic growth slip materially or efforts to preserve the euro falter, it’s possible the coalition splinters or her popularity suffers. Nevertheless, Germany has invested dearly in the preservation of the euro, so to us, it’s unlikely even a new government changes tack much when it comes to maintaining the common currency.