China expects to return to positive GDP during the quarter despite a virus setback in Beijing.  Equities rallied in June driven by the continued expectation of recovery from COVID-19 and and from global money printing. The non-manufacturing PMI Index went above the 54 level, closing in on its pre-COVID level.

Uncertainty picked up when the China-India border conflict took place, resulting in the death of 20 people on each side. Passing the National Security Law in Hong Kong added to further tension between the US and China; the US marked its disbelief by passing on sanctions towards some government officials, and this comes on top of further uncertainty from the on-going US-China trade disagreement.

China’s economy is continuing to improve from the resumption of business activities across China. The Chinese are steadily getting back to a new normal life as we described last month. And we think China has successfully put the worst behind them. Their ability to deal with pandemics is much further along due to their experience dealing with such pandemics in the past two decades. The data should reflect a notable improvement in June and onwards. PMI, PPI, GDP and corporate earnings are all steadily improving quarter on quarter.

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Source:  Bloomberg LP, Marco Polo Pure Asset Management