Session recordingChina

China, emerging markets and the pandemic

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

Speaker

Patrick Zweifel joined Pictet in 1997 and is chief economist at Pictet Asset Management.
Before assuming his current position in 2009, he was head of macro research at Pictet Private Wealth Management. In particular, he had economic research responsibility for emerging markets and for the development of quantitative models on major asset classes, primarily foreign exchange models.
Before joining Pictet he was a research assistant in econometrics and monetary theory and worked on international research projects for the World Bank and the European Union.
He holds a PhD in Econometrics from the University of Lausanne.

Moderator

Colin Tate has been an investment industry media publisher and conference producer since 1996. In his media career, Tate has launched and overseen dozens of print and electronic publications. He is the chief executive and major shareholder of Conexus Financial, which was formed in 2005, and is headquartered in Sydney, Australia. The company stages more than 20 conferences and events each year – in London, New York, San Francisco, Los Angeles, Amsterdam, Beijing, Sydney and Melbourne – and publishes five media brands, including the global website and strategy newsletter for global institutional investors www.top1000funds.com. One of the company’s signature events is the bi-annual Fiduciary Investors Symposium. Conexus Financial’s events aim to place the responsibilities of investors in wider societal, and political contexts, as well as promote the long-term stability of markets and sustainable retirement incomes. Tate served for seven years on the board of Australia’s most high profile homeless charity, The Wayside Chapel; and he has underwritten the welfare of 60,000 people in 28 villages throughout Uganda via The Hunger Project.

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.
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