China has outperformed other emerging markets during the quarter as the Chinese government took drastic measures to stop the covid-19 from spreading.  When number of virus-related deaths started to drop and the trend continued, factories resumed operations back to 80-90% of pre-virus levels. Retail sales also recovering to between 50% and 80%, depending on the nature of the spending.

The domestic A shares showed resilience when the virus was firmly brought under control.  Despite reopening of factories and resuming social activities, the global economic slowdown will result in weaker orders.   Therefore,

China initiated various relief programs like increasing the general fiscal deficit, issuing special Treasury bonds and granting local governments more special bond quotas.

The economy dropped 6.8% for the quarter, the worst contraction in four decades due to lockdown effects.

We expect the government will come up with more measures to boost both employment and demand, to make up for the drag from an export sector facing dire circumstances, in addition to fresh infrastructure investment.

Domicile: Malta
Source:  Bloomberg, Marco Polo Pure Asset Management