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Why the Worst is Behind China
Escaping the trade wars that defined the end of 2019, Asian markets were met with yet another challenge in 2020 – COVID-19. Asian markets took the hit from COVID-19 well before the rest of the world, and have consequentially seen the road to recovery much faster. As economic activity picks up, we’re getting ready for China to outperform global markets.
Things are Starting to Normalise in Hong Kong and China
In China, we believe the worst is behind us after the outbreak of COVID-19 in Wuhan. Companies are gradually returning to work with resumption rates on the rise. According to the Ministry of Housing and Urban-Rural Development Construction, the restarting rate was over 58% in China as at 10 March 2020. As for logistics, overall resumption levels were over 60%, with areas such as Shenzhen as high as 97%. Logistics resumption remains key for maintaining supply chains as well as providing inputs to factories and companies for them to ramp up production activity.
On the ground in Hong Kong we have seen the number of cases of COVID-19 levelling off. Although infections are increasing they are not rising at exponential rates seen in the U.S and Europe. The bigger concern at hand is Hong Kong’s vulnerability to imported cases from these regions as globalization means deepened connectivity as well as reliance on global cities. Hong Kong still needs the support of mainland tourism for its economy, therefore may see a longer economic recovery than mainland China.
The Sectors that have Fared Best
We believe there are a few sectors/businesses that have been relatively insulated from shocks resulting from the virus outbreak. Although not completely immune to downturns in the market, certain names in education have been outperforming; as the incentive for students to take up online classes rather than offline has been gaining momentum. In addition, we see more demand for online-related businesses such as the gaming, online health care, e-commerce, food delivery and cloud industry, etc. Another business that has suffered minimal impact is infant milk formula; we have seen the demand for its products remain more resilient during COVID-19 since it is hard to find alternative products.
How China has Responded
This is not the first outbreak that China has experienced and the government has long prepared for another pandemic after their traumatic experience from SARS. This time around the Chinese government had better resources and executed strict lockdown measures to limit the spread. Constructing a brand new hospital, housing 1000 new beds with several isolation wards in a short timeframe of ten days reflects the country’s ability to respond to pandemics like COVID-19.
Thanks to China’s massive and steady investment in high-tech industries for the last few years, we are also seeing a new age of tech applications used to combat the spread of the virus in China. Front line medical workers have deployed robots that can self-navigate wards to bring food/medication to patients as well as check temperatures; autonomous droids are also working to spray disinfectant onto hospital floors.
Telemedicine is another concept that has reached new-found demand at times like these. We believe this was the perfect storm to shift offline consumer behaviour to an online platform. The platform enables a patient to reach medical consultation through an app using artificial intelligence to process the symptom brief then in real-time exchanging the information with a live doctor where a diagnosis and recommendation is approved with professional feedback. This is also integrated with a one-stop shop where the patient’s prescription is registered and medication is then delivered to the patient’s door. All of this is achievable from the comfort of one’s home. The Chinese government has been encouraging the use of online healthcare services as the benefits of online allow for the facilitation of physical isolation and reduction of cross infections.
The Outlook for Asia
We originally anticipated a full recovery for 2H2020 but now believe this could be delayed depending on the regions outside of Asia. Domestic demand driven economies like China and India should see a recovery earlier than export driven economies like Korea and Taiwan.
The Chinese government may be expected to step in to boost stimulus spending as small-medium sized firms could face substantial drops in demand for consumer products. We believe that the worst is over for China and we should see supply chains come back in the next month and a half. Factories are at 30-40% utilisation so the priority is to resume production gradually while still maintaining control of the outbreak.
A New Era of Growth
We believe that the emergence of the Asian consumer fundamentally alters the world’s order, offering long-term investment opportunity, and dominating economic themes for the next several decades.
Disclaimer
This material is neither an offer to sell nor solicitation to buy a security to any person in any jurisdiction where such solicitation, offer, purchase or sale would be unlawful under the laws of that jurisdiction. Investment involves risk.
The information in this material is based on sources we believe to be reliable but we do not guarantee the accuracy of completeness of the information provided. This material has not been reviewed by SFC and shall only be circulated in countries where it is permitted.
This material is intended solely for your private use and shall not be reproduced or recirculated either in whole or in part, without the written permission of Mirae Asset Global Investments. This document has been prepared for presentation, illustration and discussion purposes only and is not legally binding. Whilst compiled from sources Mirae Asset Global Investments believes to be accurate, no representation, warranty, assurance or implication to the accuracy, completeness or adequacy from defect of any kind is made. The division, group, subsidiary or affiliate of Mirae Asset Global Investments which produced this document shall not be liable to the recipient or controlling shareholders of the recipient resulting from its use. The views and information discussed or referred in this report are as of the date of publication, are subject to change and may not reflect the current views of the writer(s). The views expressed represent an assessment of market conditions at a specific point in time, are to be treated as opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. In addition, the opinions expressed are those of the writer(s) and may differ from those of other Mirae Asset Global Investments’ investment professionals.
This material is neither an offer to sell nor solicitation to buy a security to any person in any jurisdiction where such solicitation, offer, purchase or sale would be unlawful under the laws of that jurisdiction.
Investment involves risk. The information in this material is based on sources we believe to be reliable but we do not guarantee the accuracy of completeness of the information provided. This material has not been reviewed by SFC and shall only be circulated in countries where it is permitted.
This material is intended solely for your private use and shall not be reproduced or recirculated either in whole or in part, without the written permission of Mirae Asset Global Investments. This document has been prepared for presentation, illustration and discussion purposes only and is not legally binding. Whilst compiled from sources Mirae Asset Global Investments believes to be accurate, no representation, warranty, assurance or implication to the accuracy, completeness or adequacy from defect of any kind is made. The division, group, subsidiary or affiliate of Mirae Asset Global Investments which produced this document shall not be liable to the recipient or controlling shareholders of the recipient resulting from its use. The views and information discussed or referred in this report are as of the date of publication, are subject to change and may not reflect the current views of the writer(s). The views expressed represent an assessment of market conditions at a specific point in time, are to be treated as opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. In addition, the opinions expressed are those of the writer(s) and may differ from those of other Mirae Asset Global Investments’ investment professionals.
The provision of this document shall not be deemed as constituting any offer, acceptance, or promise of any further contract or amendment to any contract which may exist between the parties. It should not be distributed to any other party except with the written consent of Mirae Asset Global Investments. Nothing herein contained shall be construed as granting the recipient whether directly or indirectly or by implication, any license or right, under any copy right or intellectual property rights to use the information herein. This document may include reference data from third-party sources and Mirae Asset Global Investments has not conducted any audit, validation, or verification of such data. Mirae Asset Global Investments accepts no liability for any loss or damage of any kind resulting out of the unauthorized use of this document. Investment involves risk. Past performance figures are not indicative of future performance. Forward-looking statements are not guarantees of performance. The information presented is not intended to provide specific investment advice. Please carefully read through the offering documents and seek independent professional advice before you make any investment decision. Products, services, and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries, and/or distributors of Mirae Asset Global Investments as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction.
Hong Kong: This material is prepared by Mirae Asset Global Investments (HK) Limited (Mirae HK). Mirae HK is regulated by the SFC (CE reference: ALK083).
United Kingdom: This document does not explain all the risks involved in investing in the Fund and therefore you should ensure that you read the Prospectus and the Key Investor Information Documents (“KIID”) which contain further information including the applicable risk warnings. The taxation position affecting UK investors is outlined in the Prospectus. The Prospectus and KIID for the Fund are available free of charge from http://investments.miraeasset.eu, or from Mirae Asset Global Investments (UK) Ltd., 4th Floor, 4-6 Royal Exchange Buildings, London EC3V 3NL, United Kingdom, telephone +44 (0)20 7715 9900.
This document has been approved for issue in the United Kingdom by Mirae Asset Global Investments (UK) Ltd, a company incorporated in England & Wales with registered number 06044802, and having its registered office at 4th Floor, 4-6 Royal Exchange Buildings, London EC3V 3NL, United Kingdom. Mirae Asset Global Investments (UK) Ltd. is authorised and regulated by the Financial Conduct Authority with firm reference number 467535..
Why the Worst is Behind China
Escaping the trade wars that defined the end of 2019, Asian markets were met with yet another challenge in 2020 – COVID-19. Asian markets took the hit from COVID-19 well before the rest of the world, and have consequentially seen the road to recovery much faster. As economic activity picks up, we’re getting ready for China to outperform global markets.
Things are Starting to Normalise in Hong Kong and China
In China, we believe the worst is behind us after the outbreak of COVID-19 in Wuhan. Companies are gradually returning to work with resumption rates on the rise. According to the Ministry of Housing and Urban-Rural Development Construction, the restarting rate was over 58% in China as at 10 March 2020. As for logistics, overall resumption levels were over 60%, with areas such as Shenzhen as high as 97%. Logistics resumption remains key for maintaining supply chains as well as providing inputs to factories and companies for them to ramp up production activity.
On the ground in Hong Kong we have seen the number of cases of COVID-19 levelling off. Although infections are increasing they are not rising at exponential rates seen in the U.S and Europe. The bigger concern at hand is Hong Kong’s vulnerability to imported cases from these regions as globalization means deepened connectivity as well as reliance on global cities. Hong Kong still needs the support of mainland tourism for its economy, therefore may see a longer economic recovery than mainland China.
The Sectors that have Fared Best
We believe there are a few sectors/businesses that have been relatively insulated from shocks resulting from the virus outbreak. Although not completely immune to downturns in the market, certain names in education have been outperforming; as the incentive for students to take up online classes rather than offline has been gaining momentum. In addition, we see more demand for online-related businesses such as the gaming, online health care, e-commerce, food delivery and cloud industry, etc. Another business that has suffered minimal impact is infant milk formula; we have seen the demand for its products remain more resilient during COVID-19 since it is hard to find alternative products.
How China has Responded
This is not the first outbreak that China has experienced and the government has long prepared for another pandemic after their traumatic experience from SARS. This time around the Chinese government had better resources and executed strict lockdown measures to limit the spread. Constructing a brand new hospital, housing 1000 new beds with several isolation wards in a short timeframe of ten days reflects the country’s ability to respond to pandemics like COVID-19.
Thanks to China’s massive and steady investment in high-tech industries for the last few years, we are also seeing a new age of tech applications used to combat the spread of the virus in China. Front line medical workers have deployed robots that can self-navigate wards to bring food/medication to patients as well as check temperatures; autonomous droids are also working to spray disinfectant onto hospital floors.
Telemedicine is another concept that has reached new-found demand at times like these. We believe this was the perfect storm to shift offline consumer behaviour to an online platform. The platform enables a patient to reach medical consultation through an app using artificial intelligence to process the symptom brief then in real-time exchanging the information with a live doctor where a diagnosis and recommendation is approved with professional feedback. This is also integrated with a one-stop shop where the patient’s prescription is registered and medication is then delivered to the patient’s door. All of this is achievable from the comfort of one’s home. The Chinese government has been encouraging the use of online healthcare services as the benefits of online allow for the facilitation of physical isolation and reduction of cross infections.
The Outlook for Asia
We originally anticipated a full recovery for 2H2020 but now believe this could be delayed depending on the regions outside of Asia. Domestic demand driven economies like China and India should see a recovery earlier than export driven economies like Korea and Taiwan.
The Chinese government may be expected to step in to boost stimulus spending as small-medium sized firms could face substantial drops in demand for consumer products. We believe that the worst is over for China and we should see supply chains come back in the next month and a half. Factories are at 30-40% utilisation so the priority is to resume production gradually while still maintaining control of the outbreak.
A New Era of Growth
We believe that the emergence of the Asian consumer fundamentally alters the world’s order, offering long-term investment opportunity, and dominating economic themes for the next several decades.
Disclaimer
This material is neither an offer to sell nor solicitation to buy a security to any person in any jurisdiction where such solicitation, offer, purchase or sale would be unlawful under the laws of that jurisdiction. Investment involves risk.
The information in this material is based on sources we believe to be reliable but we do not guarantee the accuracy of completeness of the information provided. This material has not been reviewed by SFC and shall only be circulated in countries where it is permitted.
This material is intended solely for your private use and shall not be reproduced or recirculated either in whole or in part, without the written permission of Mirae Asset Global Investments. This document has been prepared for presentation, illustration and discussion purposes only and is not legally binding. Whilst compiled from sources Mirae Asset Global Investments believes to be accurate, no representation, warranty, assurance or implication to the accuracy, completeness or adequacy from defect of any kind is made. The division, group, subsidiary or affiliate of Mirae Asset Global Investments which produced this document shall not be liable to the recipient or controlling shareholders of the recipient resulting from its use. The views and information discussed or referred in this report are as of the date of publication, are subject to change and may not reflect the current views of the writer(s). The views expressed represent an assessment of market conditions at a specific point in time, are to be treated as opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. In addition, the opinions expressed are those of the writer(s) and may differ from those of other Mirae Asset Global Investments’ investment professionals.
This material is neither an offer to sell nor solicitation to buy a security to any person in any jurisdiction where such solicitation, offer, purchase or sale would be unlawful under the laws of that jurisdiction.
Investment involves risk. The information in this material is based on sources we believe to be reliable but we do not guarantee the accuracy of completeness of the information provided. This material has not been reviewed by SFC and shall only be circulated in countries where it is permitted.
This material is intended solely for your private use and shall not be reproduced or recirculated either in whole or in part, without the written permission of Mirae Asset Global Investments. This document has been prepared for presentation, illustration and discussion purposes only and is not legally binding. Whilst compiled from sources Mirae Asset Global Investments believes to be accurate, no representation, warranty, assurance or implication to the accuracy, completeness or adequacy from defect of any kind is made. The division, group, subsidiary or affiliate of Mirae Asset Global Investments which produced this document shall not be liable to the recipient or controlling shareholders of the recipient resulting from its use. The views and information discussed or referred in this report are as of the date of publication, are subject to change and may not reflect the current views of the writer(s). The views expressed represent an assessment of market conditions at a specific point in time, are to be treated as opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. In addition, the opinions expressed are those of the writer(s) and may differ from those of other Mirae Asset Global Investments’ investment professionals.
The provision of this document shall not be deemed as constituting any offer, acceptance, or promise of any further contract or amendment to any contract which may exist between the parties. It should not be distributed to any other party except with the written consent of Mirae Asset Global Investments. Nothing herein contained shall be construed as granting the recipient whether directly or indirectly or by implication, any license or right, under any copy right or intellectual property rights to use the information herein. This document may include reference data from third-party sources and Mirae Asset Global Investments has not conducted any audit, validation, or verification of such data. Mirae Asset Global Investments accepts no liability for any loss or damage of any kind resulting out of the unauthorized use of this document. Investment involves risk. Past performance figures are not indicative of future performance. Forward-looking statements are not guarantees of performance. The information presented is not intended to provide specific investment advice. Please carefully read through the offering documents and seek independent professional advice before you make any investment decision. Products, services, and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries, and/or distributors of Mirae Asset Global Investments as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction.
Hong Kong: This material is prepared by Mirae Asset Global Investments (HK) Limited (Mirae HK). Mirae HK is regulated by the SFC (CE reference: ALK083).
United Kingdom: This document does not explain all the risks involved in investing in the Fund and therefore you should ensure that you read the Prospectus and the Key Investor Information Documents (“KIID”) which contain further information including the applicable risk warnings. The taxation position affecting UK investors is outlined in the Prospectus. The Prospectus and KIID for the Fund are available free of charge from http://investments.miraeasset.eu, or from Mirae Asset Global Investments (UK) Ltd., 4th Floor, 4-6 Royal Exchange Buildings, London EC3V 3NL, United Kingdom, telephone +44 (0)20 7715 9900.
This document has been approved for issue in the United Kingdom by Mirae Asset Global Investments (UK) Ltd, a company incorporated in England & Wales with registered number 06044802, and having its registered office at 4th Floor, 4-6 Royal Exchange Buildings, London EC3V 3NL, United Kingdom. Mirae Asset Global Investments (UK) Ltd. is authorised and regulated by the Financial Conduct Authority with firm reference number 467535..
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KIIDs”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KIIDs can be obtained from www.am.miraeasset.eu/fund-literature . The Prospectus is available in English, French, German, and Danish, while the KIIDs are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KIID before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Australia: The information contained in this document is provided by Mirae Asset Global Investments (HK) Limited (“MAGIHK”), which is exempted from the requirement to hold an Australian financial services license under the Corporations Act 2001 (Cth) (Corporations Act) pursuant to ASIC Class Order 03/1103 (Class Order) in respect of the financial services it provides to wholesale clients (as defined in the Corporations Act) in Australia. MAGIHK is regulated by the Securities and Futures Commission of Hong Kong under Hong Kong laws, which differ from Australian laws. Pursuant to the Class Order, this document and any information regarding MAGIHK and its products is strictly provided to and intended for Australian wholesale clients only. The contents of this document is prepared by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Australian Investments & Securities Commission.
Copyright 2021. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.