How will the global financial market and A-shares come out in the French election?

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Zhitong Finance Network

Remember the British "Brexit" referendum last June? From April to May, another European political event may set off a new storm in the financial market. This is the French presidential election.

The French election was divided into two rounds and was affected by the terrorist attacks.

France voted democratically every five years to elect national leaders. There are 11 candidates in this year. President Francois Hollande is not in it. He is the first in France’s modern history who does not want to continue his second term. president.

On April 23, 2017, the first round of voting will be held in the French general election. Candidates who have won more than half of the votes in the first round of elections can be elected president. If no candidate has won more than half of the votes in the first round, the two candidates with the highest votes in the first round will advance to the second round. The second round of voting is scheduled to be held on May 7, and the winner is directly elected to the presidency.

According to the latest poll results, the four candidates with the highest support rate have become the "four-point world" pattern. Mark Long, Le Pen, Fei Yong and Mei Langxiong represent the three left, middle and right political lines in France, with 24% and 23 respectively. The support rate of %, 18.5% and 18% makes the election particularly confusing. From this point of view alone, this election will definitely cover the two rounds of voting.

Just three days before the election, a shooting incident occurred on the Champs Elysées in Paris on April 20 (Friday) at 8 pm local time, causing a police death, a policeman was seriously injured, the gunman was killed, and the terrorist organization "Islamic" The country announced responsibility for the attack and added a little uncertainty to the upcoming election.

Although the financial market trend is "indifferent" to the shooting, analysts believe that the attack in Paris will have a certain impact on voter voting intentions, and will undoubtedly increase investors' attention to this election.

Since the severe terrorist attacks in Paris in 2015, the issue of combating radical Islamic Jihad has been an important issue in the French presidential election. Due to a series of violent incidents, France is still in a state of emergency. Therefore, how to deal with terrorism and protect French citizens has become one of the core topics of this French election.

Understand the election of the French election

What is the current situation of the French election? What is the difference between the policy preferences of each candidate and the impact of election? Start with a simple diagram.

In terms of choice, as of April 18th, Emmanuel Macron and Marine Le Pen still lead other candidates with a slight advantage. The support rate between the two is not divided. Up and down, the former is 24% and the latter is 23%. This is basically consistent with the results of the previous polls, followed by François Fillon and Jean-Luc Mélenchon with 18.5% and 18% support. Benoît Hamon also has an 8% public opinion support rate.

In addition, 53% of the surveys have already made their own decisions on voting in the official elections, while the remaining 47% of respondents are still hesitant to vote for whom they vote, or may choose to abstain directly.

As a result, pre-election terrorist attacks have had unpredictable effects on those who have not made a decision. For example, the campaign team of the far-right candidate Le Pen has already accused France of being lax in its anti-terrorism security and that all terrorist security issues are the fault of the government. Regardless of whether voters accept Le Pen’s accusations, the topic of anti-terrorism will be further aggravated in this French election. The candidate’s views on immigration policy may become an important basis for voter voting.

What are the forces in the French political arena?

There are Democrats and Republicans in American politics, and French political parties can be divided into the left, the middle, and the right. The left wing emphasizes social equity, collectivism and government intervention; the middle line advocates open and pragmatic economic policies and actively promotes EU construction; the right wing advocates laissez-faireism, narrows public spending, and has a strong populist tendency.

What is the difference between BIG4 candidates?

In the middle of the route, Mark Long, the poll support rate is 24%. He advocates a balanced fiscal policy, a flexible labor policy and an open diplomatic immigration policy, especially in support of globalization and cooperation with the EU. After the election, France will remain in the euro zone.

The extreme right-wing Le Pen, the poll support rate is 23%. She advocated the abolition of the euro, the withdrawal of the euro zone, the establishment of trade protection measures, and the lifting of sanctions against Russia. In summary, anti-globalization, anti-immigration, anti-EU, can be described as the French "Trump".

In the middle right, Fei Yong, the poll support rate is 18.5%. His ruling plan advocates liberating the economy, restoring state power, and affirming the values ​​of France. He also emphasizes cooperation with the EU. France should remain in the euro zone after being elected.

The extreme left-wing Mei Longxiong, the poll support rate is 18%. He also used Brexit as a selling point, and his fiscal policy of tax increase and public expenditure was the most radical; he hoped to renegotiate the EU treaty, push the ECB to focus on employment and growth, and leave the euro zone if the negotiations fail.

Who is most likely to be elected?

From the standpoint of the onlookers, Mark Long's final election will be the most rational result. However, on the question of whether or not to leave the EU, the final judgment of the voters is still unpredictable. In addition to the psychological stimulation caused by the terrorist attacks, Le Pen is also very likely to enter the second round of voting, and even surpassed the election.

Judging from the results of the polls, the competitive combination of Mark Long and Le Pen has the highest probability of entering the second round of elections, while the former is the winner of the final election. On the one hand, Le Pen's electorate base does not occupy an absolute advantage. It is mostly composed of young people and native grassroots. The coverage is not wide. On the other hand, French political elections have a tradition of crowding out the right wing. The first round of unsuccessful party supporters tend to choose Le Pang's opponent, so regardless of Mark Long, Fei Yong or Mei Langxiong to qualify for the second round of promotion, Le Pen is in a disadvantage.

If Mark Long was eliminated in the first round but Fei Yong advanced to the second round, Le Pen or Mei Langxiong of the extreme route may still be elected. If Finale is elected, its policy is closer to Mark Long and its impact is relatively small.

And if the situation of Joan Pang and Mei Langxiong's promotion, or one of the two winners, will represent the stage of extreme political power, France may have to follow the footsteps of the United Kingdom - the risk of Brexit has soared, making the "black swan" The result appeared.

The impact of the French election on financial markets and A-shares

From the Brexit in 2016, Trump's election to the US president, to the Dutch candidate Wilde in 2017 and the French candidate Le Pen, the surge in voices indicates a Western populist counterattack. Populism is contrary to the process of globalization, expressing resistance to the uneven distribution of income, or it may be a threat to the current world order. The success or failure of European populists will have a profound impact on the direction of global stock markets, bond markets and money markets this year.

The trend of the French election, the results of the first round and the second round is expected to be directly transmitted to the exchange rate market, which will stimulate the trend of the euro. In short, if Mark Long is finally elected, it will be more euros; if the final election of Fillon, the impact on the euro is more neutral; if Le Pen or Melangon is finally elected, the euro may fall sharply in the short-term, the medium and long-term trend is not Increased certainty.

In addition, before the election results have been announced, the situation that is still full of variables will cause the market risk aversion to rise rapidly, and the overlapping geopolitical risks will increase, and the fluctuation of gold assets is expected to intensify in the short term.

Although the US dollar index is dragged down by Trump's policy, for the risk-averse demand, the US dollar may be favored by funds in the future, and the euro will be under pressure. It is particularly noteworthy that if Le Pen-Melangong’s most aggressive combination wins the first round, it will suppress the risk appetite of the entire large class of assets, and the presence of the pair of Freon-McLong will panic. Emotions will be alleviated, and the excessive horror in the early stage will lead to the recovery of the French-German credit spread.

As for the impact of the first round of elections on A-shares, Shen Wanhongyuan believes that more is the abstract relationship of the emotional level. After the market has risen in the early period and then enters the chaotic period of price-performance decline, the economy faces a decline and the risk appetite of the market under strong supervision declines. The fermentation of political cycle risk has a positive effect on the short-term market.

Zhitong added: In terms of Hong Kong stocks, from a technical point of view, the Hang Seng Index continued to be suppressed by the 10th and 20th moving averages, but it stood above 24,000 points on Friday. Before the uncertainty is unclear, the market will choose to withdraw from the wait and see. Waiting for the results of the French presidential election to be clear. Next week, for the futures settlement, it is expected that Hong Kong stocks will have a greater chance of maintaining a volatile trend. (Editor: Xiao Shunlan)