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

TL;DR

This study examines how BRICS stock markets reacted differently to Trump's US presidential victory, using event-study and social media analysis to reveal varied vulnerabilities and responses based on political and economic factors.

Contribution

It introduces a dual-method approach combining event-study regression analysis with social media and opinion poll data to assess market vulnerability to political shocks.

Findings

China was most negatively affected, Brazil also lost value.

India and South Africa experienced limited damage.

Russia benefited from Trump's favorable stance and reduced sanctions.

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.