China’s economy grew 6.5% in the forth-quarter, ending a rough coronavirus-striken 2020 in remarkably good shape. Macroeconomic numbers were encouraging and the important PMI was 51.9% in December which implies a sustained manufacturing recovery. The trade surplus reached a historical high of US$75 billion as exports to the US surged, including a big volume of new iPhone shipments. Further, it was also quiet on the US-China relationship, vaccines began official distributions and economic data released were robust and exceeding expectations.
Chinese equities are more heavily concentrated in technology related stocks, which were covid winners in 2020 as the rest of emerging markets tend to be dominated by financials, energy, and materials, which have lagged.
From a policy side, Domestic consumption is still the main focus. “Anti-trust” is another phrase appearing for the first time in high-level documents. Internet giants like Alibaba and Tencent have already achieved dominance in virtually every aspect of our daily lives, so there is a clear and present danger that those monopolistic positions will be abused.
The fundamental-driven bull market based on continuing improvements in listed companies’ earnings which continue to mount strength month by month in the China post-Covid-19 era. Top-down, China benefits from an increasing Numbers of Wealthy Consumers and Investors, Stable Political Environment, Effective Policies, good liquidity, strong Corporate Earnings and Stable Currency.
As we move forward into 2021, we believe the economy should continue to recover. The new five-year plan provides a catalyst for technological innovation, as does China’s goal of carbon-neutrality. Post Trump creates hope for an improved overseas environment. At last, China now has almost 30 million companies, which is nearly 5 times more than the largest economy in the world, the USA.
Source: Reuters, Marco Polo Pure Asset Management, Open Door, APS, Greenwoods