Russia: After a nine month dreadful equity streak for 2020, Russian equities came alive in the fourth quarter and the market posted a gain of 20% to help reduce the year’s loss to a low teen number. Retail investors in Russia have opened a wave of new equity trading accounts and the wave of fresh cash into the market resulted in the strong finish. Russians have weathered the covid storm fairly good and now the Russian covid vaccine, called the Sputnik, is available to its population, safest alternative as stated to us, free for everyone, available anywhere. Given an oil price above the government’s conservative stand going into 2020 enabled a surplus to be added to the savings. Given the underperformance of the Russian market vs developed markets and many other emergings markets in 2020, the market appears attractive relative to its peers.
India: Indian equities had a strong forth quarter with gains of 20%+ on the back of ‘feeling better’ from receeding covid numbers at about 20,000 per day at the last days of December vs 100,000 in September. More than 4 million vaccine shots have been given and a reminder here to you that India produces more than half the world’s vaccines across categories! Covid aside, India recorded its highest ever monthly inflows of USD7bn in November and in the process delivered a broad-based rally. Economic activity is approaching pre-COVID levels per and PMI recorded its highest level in over ten years as economic growth estimates are being upgraded with 70% of reported forth quarter estimates to-date above consenus. The ‘experts’ on CNBC are talking of a “raging multi-year bull market” that is coming! The recent budget has sparked a lot of optimism about a return of capex on Infrastructure and industrial capacities. There is a high likelihood that a decade of under-investment will begin to turnaround next year. FY 22 earnings growth is expected to be over 30%.
China: 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. 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: Bloomberg LP