SSA Market: Sounding the all clear? - Rabobank

Though the result of last week’s Dutch election was welcomed by markets, analysts at Rabobank have noted over the past several days that the outcome by no means sounds the all clear in terms of the populist threat to EU/EZ unity.

Key Quotes

“It would seem the reason for the market’s cheer is clear – the anti-EU Freedom Party (PVV) led by Geert Wilders performed modestly worse than anticipated by the polls taking 20 of the 150 seats up for grabs in the lower house vs. an average of a little under 23 according to the last three opinion surveys conducted prior to this vote. The ruling Liberal Party (VVD), meanwhile, performed notably better than expected winning 33 seats vs. 25 expected when taking the average of the final three opinion polls.”

“We would however make the following points: 1) While performing slightly worse than expected in the polls, the PVV still gained 5 seats to become the second largest party in the lower house; 2) 30% of VVD voters who responded to an Ipsos exit poll noted that PM Mark Rutte’s handling of the diplomatic debacle with Turkey had influenced their vote – as such, there is an element of fortuitous timing here with the flare up in Dutch-Turkish tensions; 3) In so far as the VVD’s recent firm rhetoric as regards immigration and its tough stance re. Turkey highlights a concern we have voiced on previous occasions. One need not necessarily be concerned simply with the threat of populists entering government but also the influence they exert upon the government itself.”

“Even if one were to take issue with the analysis above and conclude that the Dutch election does represent a boost for establishment parties, when viewed alongside Brexit and Trump this still represents “one out of three” and thus, for now, must be seen as an outlier rather than an indicator of a trend.”

“As such, we anticipate investors and issuers will continue to approach the French elections with caution. Marine Le Pen may be losing (some) ground in the polls, but with the first of a series of televised debates scheduled for this evening and two months of campaigning yet to come, we feel it would be premature to discount an unexpected outcome.”