Emerging markets 2020 mid-year outlook China plus one strategy

The COVID-19 outbreak gives an impetus to diversify the China supply chain and Southeast Asia and India are potential beneficiaries here

01 Jul 2020

Many companies are however looking at a ‘China plus one’ strategy …
South-East Asia and India are potential beneficiaries of the ‘plus one’ strategy, and we’ll likely see more reshoring to North America, Korea or Japan.

Geoffrey Wong, Head of Emerging Markets and Asia-Pacific Equities

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While the attention of the COVID-19 pandemic moves away from China, businesses are slowly resuming, but will China and EM continue to be global growth hotspots, and is investment in China still too big an opportunity to ignore? We take an in-depth look at the pace of recovery in Emerging Markets (EM) and explore whether the economic recovery is a roadmap for the West.

Some observers may draw parallels between COVID-19 and SARS, but the current pandemic is much more significant because of its severity and geographical spread, due mainly to the fact that world is now much more interconnected. Additionally, China is now a much more significant part of the world economy than it was before.

As we write, it is difficult to predict the shape of a COVID-19 recovery since a lot depends on how both the outbreak evolves and how the search for preventions and cures progresses. As such, this is likely to be a story that continues into next year.

But at a time when new cases, treatments and policies drive a global news cycle, the challenge for forward-looking investors is to focus on what matters. With that in mind, here are eight takeaways on our current view and the future outlook for EM equities:

Mid-year outlook 2020

A short, sharp shock or prolonged pain?

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