China, emerging markets and the pandemic

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The impact of the COVID-19 health and economic crisis is acutely more severe in emerging markets. What will the long-term impact of this be, and could the Renminbi emerge as a safe-haven currency? View  Patrick’s presentation slides[vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Patrick%20Zweifel%22%2C%22job_role%22%3A%22Chief%20economist%2C%20Pictet%20(Switzerland)%22%2C%22content%22%3A%22Patrick%20Zweifel%20joined%20Pictet%20in%201997%20and%20is%20chief%20economist%20at%20Pictet%20Asset%20Management.%5CnBefore%20assuming%20his%20current%20position%20in%202009%2C%20he%20was%20head%20of%20macro%20research%20at%20Pictet%20Private%20Wealth%20Management.%20In%20particular%2C%20he%20had%20economic%20research%20responsibility%20for%20emerging%20markets%20and%20for%20the%20development%20of%20quantitative%20models%20on%20major%20asset%20classes%2C%20primarily%20foreign%20exchange%20models.%5CnBefore%20joining%20Pictet%20he%20was%20a%20research%20assistant%20in%20econometrics%20and%20monetary%20theory%20and%20worked%20on%20international%20research%20projects%20for%20the%20World%20Bank%20and%20the%20European%20Union.%5CnHe%20holds%20a%20PhD%20in%20Econometrics%20from%20the%20University%20of%20Lausanne.%5Cn%22%2C%22image%22%3A%2231911%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Fpatrick-zweifel-pam%2F%3ForiginalSubdomain%3Dch%22%7D%5D” title=”Speaker” el_class=””][vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Colin%20Tate%22%2C%22job_role%22%3A%22Chief%20executive%2C%20Conexus%20Financial%20(Australia)%22%2C%22content%22%3A%22Colin%20Tate%20has%20been%20an%20investment%20industry%20media%20publisher%20and%20conference%20producer%20since%201996.%20In%20his%20media%20career%2C%20Tate%20has%20launched%20and%20overseen%20dozens%20of%20print%20and%20electronic%20publications.%20He%20is%20the%20chief%20executive%20and%20major%20shareholder%20of%20Conexus%20Financial%2C%20which%20was%20formed%20in%202005%2C%20and%20is%20headquartered%20in%20Sydney%2C%20Australia.%20The%20company%20stages%20more%20than%2020%20conferences%20and%20events%20each%20year%20%E2%80%93%20in%20London%2C%20New%20York%2C%20San%20Francisco%2C%20Los%20Angeles%2C%20Amsterdam%2C%20Beijing%2C%20Sydney%20and%20Melbourne%20%E2%80%93%20and%20publishes%20five%20media%20brands%2C%20including%20the%20global%20website%20and%20strategy%20newsletter%20for%20global%20institutional%20investors%20conexust1f.flywheelstaging.com.%20One%20of%20the%20company%E2%80%99s%20signature%20events%20is%20the%20bi-annual%20Fiduciary%20Investors%20Symposium.%20Conexus%20Financial%E2%80%99s%20events%20aim%20to%20place%20the%20responsibilities%20of%20investors%20in%20wider%20societal%2C%20and%20political%20contexts%2C%20as%20well%20as%20promote%20the%20long-term%20stability%20of%20markets%20and%20sustainable%20retirement%20incomes.%20Tate%20served%20for%20seven%20years%20on%20the%20board%20of%20Australia%E2%80%99s%20most%20high%20profile%20homeless%20charity%2C%20The%20Wayside%20Chapel%3B%20and%20he%20has%20underwritten%20the%20welfare%20of%2060%2C000%20people%20in%2028%20villages%20throughout%20Uganda%20via%20The%20Hunger%20Project.%22%2C%22image%22%3A%2231893%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Fcolin-tate-839a5a181%2F%22%7D%5D” title=”Moderator” el_class=””][vc_empty_space height=”10px”]

Key takeaways

• Emerging markets are appealing for a number of reasons:
• fiscal responses to COVID-19 have been appropriate, striking a good balance between necessity and affordability e.g. 9 countries adopted QE to prevent dysfunctional markets
• 75 per cent of emerging markets offer positive 10-year real yield on government bonds, in stark contrast to developed markets
• The collapse in emerging markets was severe but since mid-April there has been evidence of a recovery pathway. India and Latin America are lagging behind (30 per cent below their January levels).
• May trade figures already show some stabilisation (emerging markets are twice as sensitive to global trade as developed markets).
• RNB is a safe haven currency which is becoming more influential and more international.
• Globalisation has done so much to bring people out of poverty that we should continue to support it.
• China can be considered separately from the rest of emerging markets during economic analysis. Some emerging market countries have controlled the virus well, others not so well, which illustrates the huge divergence between emerging markets.
• Emerging market countries have more positive views on China than developed markets, perhaps in part due to views on human rights, however the economic fundamentals of China are strong. There is no way in the medium-term that you can avoid exposure to Chinese investments.