At Schwab’s 2020 IMPACT event, David Dali, and Andy Rothman at Matthews Asia discuss the massive growth opportunity in China, and key factors advisors should consider when allocating to emerging markets.
For some time, Asia has dominated the growth story in emerging markets. Today, the growth story, specifically in China is even more convincing, as the country shifts from an exports-led economy to one fueled by its own consumers. Dali, says that often when investors look for growth outside of the U.S., they allocate to broad EM or EAFE (Europe, Australasia and Far East) index-based products. However, Dali argues that traditional EM and EAFE indexes tend to underweight the rapidly growing consumer sector in China, and Asian countries in general, like South Korea and Japan. “The drivers of return are quickly moving east from EAFE to Asia,” says Dali noting the rising levels of innovation, pending patent applications, wealth creation and increased consumer spending in key Asian markets.
Earlier this year, China was at the very center of the COVID crisis, reporting a number of cases in December 2019. The government acted quickly, forcing a series of tense and severe military style lockdowns in several major cities. China also deployed very little fiscal stimulus compared to that of the United States and European nations. That approach appeared to have paid off as the number of new cases in China started to level off, as the rest of the world experienced waves of COVID surges for most of this year. Rothman notes that the Chinese economy for the most part has experienced a V shape recovery. Since the outbreak, China’s auto and property sales are back up to normal levels.
Matthews Asia’s active strategy takes a concentrated approach to investing in Asia. Leveraging more than three decades of experience, a robust research team, and a boots on the ground mentality, the specialized firm aims to uncover unique opportunities in Asian growth markets, which continue to be driven by the growing middle class. Matthews Asia is the largest Asia focused active shop in the U.S. and manages over $24 billion in assets.
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