Market Update: A Case for China

A Case for China

“Common Prosperity” headlines rattled markets in 2021, but as on-the-ground investors, we believe China’s new policy objective represents a clear step towards a sustainable, consumer-driven economy.

In this whitepaper by Senior Portfolio Managers Malcolm Dorson and Joohee An, they explore what happened in 2021 and China's new sustainable growth strategy that they believe will drive performance in 2022 and beyond.  

Definitions 

Basis Point (bp) is a unit that is equal to 1/100th of 1% and is used to denote the change in the value or rate of a financial instrument. Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. MSCI Emerging Markets Index captures large and mid cap representation across 25 EM countries. You cannot invest directly into the index. MSCI Emerging Markets ex-China Index captures large and mid cap representation across 24 of the 25 EM. You cannot invest directly into the index. MSCI World Index captures large and mid cap representation across 23 DM countries. You cannot invest directly into the index. MSCI World ex-USA Index captures large and mid cap representation across 22 of 23 DM countries. You cannot invest directly into the index. Reserve Requirement Ratio (RRR) is a central bank regulation that sets the minimum amount that a commercial bank must hold in liquid assets. S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the US. You cannot invest directly into the index. Taper tantrum of 2013 refers to the volatility in emerging markets that arose because of low reserves and high foreign currency debt among emerging economies.

Investment Considerations — There can be no guarantee that any strategy (risk management or otherwise) will be successful. All investing involves risk, including the potential of loss of principal.

Emerging Markets Risk — The risks of foreign investments are typically greater in less developed countries, which are sometimes referred to as emerging markets. For example, political, legal and economic structures in these country may be changing rapidly, which can cause instability and greater risk of loss. These countries are also more likely to experience higher levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Similarly, investors are also subject to foreign securities risks including, but not limited to, the fact that foreign investments may be subject to different and in some circumstances less stringent regulatory and disclosure standards than U.S. investments.