China ‘obvious winner’ from COVID-19
The world’s recovery from COVID-19 will be “slow and staggered” but China will be an obvious winner as the first country out of the crisis, according to Natixis Investment Managers head of global thematics and macro research Esty Dwek.
Many countries were currently in lockdown with severe restrictions on travel, work and socialising and this was expected to last for many weeks or even months yet.
In a webcast, Dwek said: “The recovery will be slow and staggered, we won’t be able to have a V-shaped recovery, it will be gradual and will take time. We will see countries and industries re-opening at a different rate and we don’t want the risk of a second wave by de-confining too quickly. We want to salvage the economy but also protect the population by preventing a spike again”.
While China had been gradually re-opening and restarting activities, it was so far the only country to be recovering. The Shanghai Stock Exchange Composite index was back in positive territory with returns of 2% since the start of the year, as was the MSCI China index with returns of 4.5%.
“Asia might be the first region out, first in first out, this is an upside for Asian performance and they have managed it much better than other regions,” Dwek said.
“China will be a winner, it is trying to reopen and ramp up activity. Even if global demand remains sluggish, domestic demand is coming back and the medium-term outlook looks good. China is an obvious winner.
“However, we will have to keep an eye on the relationship China has with the US and this will depend largely on the result of the US election in November. Secondly, there will be deglobalisation as their dependence on China is making other countries uncomfortable so we would see some strategic sectors repatriated to other regions.”
Performance of MSCI China and Shanghai Stock Exchange since start of the year to 22 April, 2020
AUTHOR
Laura Dew
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