With the expectation countries will seek to generate growth through fiscal stimulus, China and Europe have the most ‘dry powder’, while the US is running emerging market-style twin deficits, according to Antipodes.
Antipodes client portfolio manager, Alison Savas, said political shifts in Europe, particularly Germany, would lead to a focus on fiscal stimulus rather than monetary policy to drive economies.
Business leaders had advocated for infrastructure investment instead of strictly balanced budgets to boost economic activity.
Merkel’s coalition government had announced a €50 billion ($81.4 billion) plan to reduce carbon-dioxide, which focused on transport and heating.
“At over 1% of gross domestic product this proposal is significant, and it’s a similar size to the stimulus packages announced in 2009, following the global fiscal crisis,” Savas said.
Savas said not only Germany, but Europe as a whole, faced a weakening global position when it came to infrastructure in areas like ports, railroad, power grids and broadband, but that investments in these areas could boost employment and competitiveness.
“The signs point to infrastructure spend with a ‘green’ tilt, and potentially schemes with a pro-worker stance given the state of the auto sector, one of the largest employers in Germany,” Savas said.
The US/China trade war would also accelerate the rebalancing of the Chinese economy toward internal growth and a smaller current account surplus.
“Chinese fiscal stimulus will target lower income demographics. For example, discretionary consumption stimulus on top of the income tax and VAT [value-added tax] cuts, as well as some infrastructure spending, which we have already seen to date,” Savas said.
“Businesses Antipodes own such as Alibaba and Ping An Life Insurance are well positioned for Chinese policies targeting income stimulus and a strengthening of the social safety net.”