No Result
View All Result
  • Login
  • Register
Business & Technology
SUBSCRIBE
  • .
  • Thought Leadership
  • Conversations
  • International Voices
  • News
  • Wealth
  • Digital Transformation
  • Lifestyle
  • Videos
  • Podcasts
  • .
  • Thought Leadership
  • Conversations
  • International Voices
  • News
  • Wealth
  • Digital Transformation
  • Lifestyle
  • Videos
  • Podcasts
No Result
View All Result
Biztech Asia
Home Thought Leadership

The potential impact of the US presidential election on Greater China equities

by editorial
14/11/20
in Thought Leadership
3 min read
0
The potential impact of the US presidential election on Greater China equities

By Kai Kong Chay, Greater China specialist at Manulife Investment Management,

We believe that the relationship between China and the US could remain under pressure following the US presidential election and a new administration. While geopolitical tension is likely to endure, we think that the impact on Chinese equities should feasibly be well-contained and diminishing. Indeed, over the past four years, the US administration has strategically used various tools, such as trade tariffs, sanctions, and its entity list, against China. Given this uncertain backdrop, we believe the Chinese government and corporates have become better prepared to continue the country’s economic development.

We believe China’s pre-emptive response is already laid out in its Five-Year Plan: “dual circulation” led by “internal circulation”

At the fifth plenary session of the Chinese Communist Party, which took place at the end of October, the Chinese government unveiled its 14th five-year plan (2021-2025) that will serve as the guiding principles for the country’s future economic development.

Against a more challenging external environment, and at a key domestic-development stage, President Xi’s “dual circulation” strategy has already placed a strong emphasis on “internal circulation” as the primary growth engine, while “external circulation” is expected to serve as a supplementary driver. The goal is to extract China’s growth potential through faster technological progress, consumption boosts, new urbanisation, and internal supply chain enhancement while allowing the domestic and foreign markets to lift one another.

The implications of China’s fundamental economic development – home-grown innovation and self-sufficiency
Strengthening innovation capacity and achieving breakthroughs in core technologies are key for the “dual circulation” strategy. We expect to see more domestic national champions strive for homegrown innovation in areas like biotech and electric vehicles. Furthermore, we anticipate the rollout of additional fiscal support and policies, such as tax incentives or low-cost funding, to facilitate import substitution and self-sufficiency. This will likely boost supply-chain upgrades and industrial automation across the regions.

Another focus of China’s “internal circulation” is domestic consumption. There is plenty of unmet demand for lifestyle-related services, and these are likely to enjoy higher growth thanks to their repeatable nature. Also, e commerce penetration should be supported by product-category expansion (e.g. medicines and grocery) and wider age-group adoption.

Tech and supply chains matters – wait and see, but new opportunities exist
In terms of the Sino-US relationship, we will waitand-see what path the new administration pursues. Nevertheless, the race to self-sufficiency in China’s core technology sectors, such as semiconductors, provides opportunities along the value chain. For example, among the upstream semiconductor supply chain, equipment is one of the segments with the lowest level of localisation. This explains the highly targeted and supportive central-government policies and tax incentives aimed at fixing this from the outset.

Electric vehicles (EV) present another opportunity set for Chinese enterprises looking to develop brands that cater to local tastes and the physical environment. Backed by the endorsement of leading global EV brands, Chinese auto component makers are breaking into the global EV supply chain. The success story of Chinese enterprises gaining market share from the global tech supply chain could well be replicated in the EV segment.

Capital-market liberalisation and a fostering of Chinese equities – an invitation to global investors to participate
More importantly, we expect that China’s growth will continue to show a differential from the rest of the world – even more so in the post-pandemic world. It is likely to attract more foreign capital to renminbi=-denominated assets or high-growth and well-managed Chinese enterprises.

Meanwhile, the Chinese government is giving the green light to foreign institutions that are willing to participate in China’s growth opportunities and connecting with global investors by liberalising its capital markets.

For example, Shanghai STAR board and Shenzhen ChiNext have adopted registration-based listing regimes (as opposed to the previously lengthy approval process) and market-determined pricing.

Foreign financial institutions, such as brokerages and asset managers, can now take a majority stake in their Chinese joint ventures. And from April 2020, they have been able to set up wholly owned units.

Many foreign asset managers, including those from the US and Europe, have responded positively by increasing investment in China, despite rising tensions in Sino-US relations.

Conclusion – identify stock drivers with a bottom-up approach
For fundamental reasons, we remain cautious on export-oriented sectors. We believe that global demand recovery still depends on whether there will be a third wave of the pandemic, and post-pandemic requirements and behaviour may imply changes in terms of product specs and design. Domestic manufacturing will likely need time to adjust and restructure its production change.

Despite the geopolitical uncertainties and short-term volatility, we believe it is important to focus on long-term fundamentals. Investors should continue to look for investment themes (i.e. consumption upgrades, innovation and policy beneficiaries) that ride on secular megatrends and are unlikely to be reversed no matter who takes the US president’s office. If there are any indiscriminate sell-offs, these could be viewed as buying opportunities.

Previous Post

Australian property market in 2020 and what to look out for in 2021?

Next Post

Renewing International Cooperation

editorial

editorial

Related Posts

Are bad PCR practices churning out false positive Covid-19 cases?
Thought Leadership

A vaccination race between nations can have no winners

The Big Picture: Boats afloat
Thought Leadership

The Big Picture: Boats afloat

Comprehensive measures required to win Malaysia’s pandemic war
Thought Leadership

Comprehensive measures required to win Malaysia’s pandemic war

IKEA fits in a world that wants to buy less, says Ingka Group’s CEO
Thought Leadership

IKEA fits in a world that wants to buy less, says Ingka Group’s CEO

The how of adopting blockchain route for the halal meat industry
Thought Leadership

The how of adopting blockchain route for the halal meat industry

How to build more resilient countries after the COVID-19 pandemic
Thought Leadership

How to build more resilient countries after the COVID-19 pandemic

Next Post
Renewing International Cooperation

Renewing International Cooperation

Lingering Challenges in the US-ASEAN Strategic Partnership

Lingering Challenges in the US-ASEAN Strategic Partnership

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

Recommended Stories

Kenanga Investment Bank acquires 19% stake in Tokenize

Kenanga Investment Bank acquires 19% stake in Tokenize

China’s Dual Circulation Pivot

Investors have their eyes on bond yields

Johnnie Walker embraces the festive spirit with one million trees

Johnnie Walker embraces the festive spirit with one million trees

Popular Stories

  • Economic recovery: an elusive thought?

    Economic recovery: an elusive thought?

    0 shares
    Share 0 Tweet 0
  • Cannibalising your business can be profitable

    0 shares
    Share 0 Tweet 0
  • Sexual fulfillment builds confidence and well-being

    0 shares
    Share 0 Tweet 0
  • Tech Stocks – Ant gets stomped on but REITS offer stability amid volatility

    0 shares
    Share 0 Tweet 0
  • Singapore REITS and China tech stocks – Which should you buy?

    0 shares
    Share 0 Tweet 0

About Us

A Business and Technology digital publication that engages business leaders in business and technology conversations to help everyone pivot, adapt, and thrive in these turbulent times.

LEARN MORE »

Contact Us

Phone: 016-2011 050

Email: editor@biztech.asia

Address:
Level 18, Boutique Office 1 (B01-C)
Menara 2, No. 3, Jalan Bangsar,
KL Eco City, 59200, Kuala Lumpur.

Email Newsletter

Loading

© 2020 Business & Technology - made possible by Milestones Digital.

No Result
View All Result
  • Home
  • Thought Leadership
  • Conversations
  • International Voices
  • News
  • Wealth
  • Digital Transformation
  • Lifestyle
  • Videos
  • Podcasts
  • Login
  • Sign Up

© 2020 Business & Technology - made possible by Milestones Digital.

Welcome Back!

Sign In with Facebook
Sign In with Google
OR

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Sign Up with Facebook
Sign Up with Google
OR

Fill the forms bellow to register

*By registering into our website, you agree to the Terms & Conditions and Privacy Policy.
All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
Social Media Auto Publish Powered By : XYZScripts.com
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?

You have successfully subscribed to the newsletter

There was an error while trying to send your request. Please try again.

will use the information you provide on this form to be in touch with you and to provide updates and marketing.