Donald Trump's victory in the US presidential election earlier this month came as a big shock to most stock analysts and investors. A bigger surprise is the way global markets have reacted to his victory.

Instead of a catastrophic meltdown, as many analysts had predicted, the US stock market has led a global rally that's still going strong. In fact, the Trump effect provided the main driving force behind the strong performance of the Hong Kong market which was, otherwise, clouded by growing concerns over the downturn of the local economy.

Trump's bombastic campaign rhetoric might have turned off some people. But, investors are finding many to like his economic policies.

We're talking about what Trump may do after taking office in January next year. His assumed pro-business stance that promises higher economic growth and corporate earnings seems to be enough, at least for now, to have energized the stock market and send bond prices tumbling.

The President-elect has talked about cutting taxes on businesses and fewer regulations that have been blamed for hobbling investment and expansion. He also promised to increase infrastructure investments to boost economic growth and employment.

To what extent those proposals, when put into practice, would benefit the economy remains to be seen. But, they would significantly boost credit demand which, in turn, would push up borrowing costs and the inflation rate.

Such expectations seem to have overshadowed concerns about Trump's anti-globalization trade policy which can hurt US exports and backfire on US companies, notably, Apple that have benefited greatly from having its products made in various low-cost manufacturing bases in Asia and South America. But, such worries have been largely put aside by investors, recognizing that Trump may not have his way in the usually tedious and time-consuming trade negotiations.

Investors' main interest has been clearly reflected in the booming US stock market where companies in the banking and energy sectors are doing particularly well. The expectations of rising interest rates should bode well for bank stocks listed in Hong Kong by improving lenders' margin. The market was also buoyed by hopes that the anticipated strong economic performance in the US - one of Hong Kong's largest markets - could help lift the city's economy.

(HK Edition 11/21/2016 page9)