(Bloomberg) -- For investors in Asia, it's all about who wins the U.S. presidential election.
While stocks in the region followed their U.S. counterparts higher Thursday, the rally was much broader than seen on Wall Street as positive sentiment toward a Biden-led trade policy outweighed the likelihood of a smaller American stimulus package after the vote.
The MSCI Asia Pacific Index rose 2% on Thursday, set for the most in four months. The S&P 500 Index closed up over 2%, though an equal-weighted version of the gauge was little changed as the rally was driven by a surge in defensive technology stocks.
With Biden on the brink of victory, Asia investors are warming to the likelihood of a more conventional trade policy and improved foreign relations from the former Vice-President. The Democrat has committed to working with global peers on matters of commerce, a stark contrast from the often unilateral trade decisions of President Donald Trump, which frequently roiled risk assets in the region over the last number of years.
This Is Looking Like the Best of Both Worlds for Asia's Markets
“We believe emerging market assets would likely outperform on improved trade sentiment in case of a Biden win, especially Asia ex-Japan assets,” strategists at the BlackRock Investment Institute said in a note on Wednesday. “Many countries in that region have managed to contain the virus and are further ahead in the economic restart.”
About 80% of stocks in the Asian benchmark were higher as of 3:32 p.m. Hong Kong time, with all major markets in the region trading in the green. Beaten-up markets such as the Philippines, Hong Kong and Singapore rallied the most Thursday morning while tech and health-care stocks contributed most to the Asian gauge's gains.
Also helping sentiment was speculation the tightly contested U.S. election would put pressure on the Federal Reserve to unleash even more monetary stimulus to support the economy under a divided government.
On Wednesday, Biden won Michigan and Wisconsin, putting him closer to taking the White House from President Donald Trump. He needs only to win an additional outstanding state, such as Nevada where he is leading, or Georgia, where his campaign believes absentee votes will push him over the top.
“A Biden win still eases geopolitical tensions, which benefits Europe and Asia,” said Mark McCormick, strategist at TD Securities. “That's likely why risk assets are perky this morning.”
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