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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.
The Florida State Board of Administration has made some strategic moves to take advantage of opportunities in the dislocation, including in private equity, distressed debt and active listed equities.. But CIO, Ash Williams, is concerned about the underlying real economy.
The Responsible Asset Allocator Initiative finds that 25 leading public pension and sovereign wealth funds, with assets of $6 trillion, are investing tens of billions of dollars in COVID-19 solutions and in funds to support stricken companies. Here they look at what the leading asset allocators around the world are doing to respond to the pandemic.
Global economic activities will not be back to pre-COVID levels until 2022 according to CPP Investments’ outlook, with the giant Canadian investor expecting the situation to get worse before it gets better.
The coronavirus pandemic sparked a surge of volatility across global financial markets. In this paper, MSCI looks at five key lessons for investors from the crisis, including that managing factors was more critical than picking stocks.
New research looking at the impact of COVID-19 under different scenarios – from opening of economies to no vaccine – suggests the economic consequences of COVID-19 under all scenarios is substantial and the ongoing economic adjustment is far from over.
Meticulous planning for the next market crash, and an eye on liquidity, meant IMCO was well positioned to invest, particularly in credit, when the opportunity arose. The fund continues to use its agility to its advantage and is now looking for opportunities in private markets.
It is critical to analyse how much COVID-19 could impact the US economy and stock markets but most of the traditional factors or economic indicators will lag the market movement. Therefore, alternative datasets other than the financial data show their explanation power to provide insights into the pandemic. This article, by academics at Tsinghua University, University of Illinois and Carnegie Mellon University, looks at the pattern of the market fluctuation from the perspective of alternative data.
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