Political elections and uncertainty -Are BRICS markets equally exposed to Trump's agenda?

Abstract

There certainly is little or no doubt that politicians, sometimes consciously and sometimes not, exert a significant impact on stock markets. The evolving volatility over the Republican Donald Trump's surprise victory in the US presidential election is a perfect example when politicians, through announced policies, send signals to financial markets. The present paper seeks to address whether BRICS (Brazil, Russia, India, China and South Africa) stock markets equally vulnerable to Trump's plans. For this purpose, two methods were adopted. The first presents an event-study methodology based on regression estimation of abnormal returns. The second is based on vote intentions by integrating data from social media (Twitter), search queries (Google Trends) and public opinion polls. Our results robustly reveal that although some markets emerged losers, others took the opposite route. China took the biggest hit with Brazil, while the damage was much more limited for India and South Africa. These adverse responses can be explained by the Trump's neo-mercantilist attitude revolving around tearing up trade deals, instituting tariffs, and labeling China a "currency manipulator". However, Russia looks to be benefiting due to Trump's sympathetic attitude towards Vladimir Putin and expectations about the scaling down of sanctions imposed on Russia over its role in the conflict in Ukraine.