China

This publication returns from its summer break, but the Multi Asset team has been busy raking through the changing leaves that have shifted market dynamics. Get wind of their latest insights in the Investors’ Outlook.

Japan’s economic success story after World War II was like a phoenix rising from the ashes. But it didn’t last, resulting in the “Lost Decade” and China subsequently taking its place as the world’s second-largest economy. Comparing the Japan of yesteryear with today’s China raises the question whether China could soon face a similar fate.

After two years of grappling with an ailing property market that has weighed on growth in the world’s second-largest economy, China’s government has pledged stronger fiscal measures and signaled more flexible monetary policy. Will they move the needle?

China’s last few years have presented new economic challenges, and Beijing has completely rewritten its policy priorities and playbook. But looking ahead, this does not mean Chinese investment won’t be rewarded in the future; rather that policy-compliance should be a criterion considered by investors.

After a multi-decade era of significant economic growth, China is now the second largest global economy and dominant in the MSCI emerging market index. How should emerging market equities investors balance this with the potential implications of recent economic and political moves out of Beijing and shifting demographic patterns?

Markets experienced a setback in August 2023 as rate expectations for 2024 and 2025 rose, driven by reduced recession risks and inflation worries from fiscal stimulus and debt. Concerns about contagion from Chinese real estate developers in the banking system seem exaggerated. Our models remain constructive on equities.

After a tumultuous decade, the stars may be set to favor emerging market local currency bonds again. Portfolio manager Carl Vermassen says there are good reasons to believe their outperformance so far this year isn’t just a one-off lucky shot.

While the impact of tighter monetary policy has started to seep into the real economy and it’s clear it won’t leave it unscathed, adjusting the lens also shows us a positive side of the coin. Our Multi Asset Boutique balances the details and the big picture, along with the accentuating highlights painted by the brushstrokes out of China and emerging markets. Find out what they see.

Is China’s property market on the mend? Are there any more humps in the road before it turns the corner? Our emerging markets credit specialists Cosmo Zhang and Wouter van Overfelt explain how contrarian investors who may have missed the strong rebound in December can now spot potential opportunities for generating alpha.

Wouter Van Overfelt, Head of Emerging Market Corporates and Luc D’hooge, Head of Emerging Markets Bonds, provide a review on the developments in the first quarter, the current positioning of the strategies as well as an outlook for the remainder of 2023.

When comparing the earnings trajectory of emerging markets corporates with that of their developed-market counterparts, many investors consider this a lost decade. Are emerging market stocks now set to bounce back?

As China readies for the Year of the Rabbit, there are several causes for celebration, says Fixed Income Boutique Credit Analyst Cosmo Zhang. Economic recovery could come earlier and stronger than expected in the first quarter of 2023, as mobility and supply chains return to normal despite a Covid surge.