Emerging markets are likely to lead the way
Global exports will likely slow but remain strong.
On a year-over-year basis, global exports for the five largest exporters in the world have slowed from their peak but remain strong. Supply chain disruptions, production backlogs, and port congestion will likely result in additional slowdowns in exports, but they should remain above pre-covid levels on the strength of global demand.
Year-over-year export growth by country
2013 ‑ current
Source: Manulife Investment Management, Bloomberg, as of March 31, 2021
Copper prices are indicating a slowing Chinese economy.
As China is the largest importer of copper, an increase in the price of copper is usually tied to an increase in demand from China. Due to its broad use throughout various industries, the price of copper is often seen as good indicator for the health of the Chinese economy. The recent slow down in year over year growth in the price of copper indicates a near term slowdown in the Chinese economy.
Chinese Imports vs Copper Prices YOY Change
2007–Current (with 6-month forward forecast)
Source: Manulife Investment Management, Bloomberg, as of September 30, 2021
Despite short term headwinds, Asia equities may benefit from stronger economic growth.
In their July World Economic Outlook, the International Monetary Fund projects that many regions around the world, especially emerging and developing Asia, could grow faster than the U.S. in 2021 and 2022. The improving economic outlook should benefit all regions lead by the emerging markets.
Economic Growth Projections
Source: Manulife Investment Management, International Monetary Fund, as of July 2021
Longer-term fundamentals remain strong for Asia.
Asia is home to 60% of the world’s population, with China and India each accounting for about 18% of the global total. As incomes rise, the Asian middle class is expected to grow by about 1.2 billion people by 2030, significantly boosting consumption. A strong middle class provides a stable consumer base that drives stable economic growth.
The rise of the Asian middle class
—share of the global middle class by region (percent)
Source: Brookings Institution. Middle Class = household with incomes between $11–$200 per person/day (PPP) 2011 Manulife Investment Management’s sample strategy
• Favour a selective approach to Canadian equities.
• Consider diversifying business risks, not just sectors.
• Look for opportunities to take advantage of market dislocations.
• Consider dollar‑cost averaging into equities.
International developed market equities
• Consider less constrained strategies that can seek out opportunities wherever they may present themselves.
Emerging Market equities
Opportunities may exist within the emerging markets, specifically in the Asia ex‑Japan region.
• Favour flexible strategies that can seize opportunities wherever they may be.
•Consider using different types of bonds for different objectives, whether it is downside protection or enhanced yield.
•Be mindful of the potential currency impact on global allocations.
Source: Manulife Investment Management as of December 31, 2020. For illustration purposes only. Performance histories are not indicative of future returns. The information in this document does not replace or supersede KYC (know your client) suitability, needs analysis or any other regulatory requirements. Clients should seek the advice of professionals before making any investment decisions.