Asian economies are turning the corner
Asia was the first region to be hit by the virus and the first to come out of lockdown. Now it is leading the global recovery.
South Korea, a bellwether for world trade thanks to its deep integration into Asian supply chains, has become the latest economy to enter recession. Second-quarter GDP slumped 2.9% on the year, driven by the biggest quarterly drop in exports since 1963, says Alex Holmes of Capital Economics.
Seoul has dealt well with the virus and consumption is growing again, but that is being overshadowed by shaky global demand as trading partners struggle to “get back on their feet”. The rebound will be slow.
Asia was the first region to be hit by the virus and the first to come out of lockdown, Jason Hollands of investment services group Tilney told Sarah Bridge in The Mail on Sunday.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Now it is leading the global recovery. Emerging markets can be a “roller-coaster”, but that is in the price. Korean equities, for example, trade on a very reasonable cyclically adjusted price/earnings ratio (Cape) of 12.3.
Asian nations have distinguished themselves in their response to Covid-19, with death rates far lower than those in the West, says Kishore Mahbubani for Project Syndicate. While Western politicians have neglected institutions and expertise, Asian nations have invested in “good governance”. Per capita health expenditure in Vietnam increased by 9% a year between 2000 and 2016. The result is that Covid-19 cases have been very low and output has swiftly returned to near-normal levels.
Following in China’s footsteps
The health picture is only one facet of Vietnam’s admirable “strategic discipline”. The country was once one of the world’s poorest, but its doi moi (renovation) reforms in 1986 changed everything.
The country emerged as one of the world’s fastest-growing economies, clocking up average annual growth rates of around 7%. In a single generation extreme poverty rates fell from 50% to just 3%.
Vietnam’s export-led growth model owes much to the Chinese experience, writes Buttonwood in The Economist. That leaves it vulnerable to slowing global trade, but it is still one of the few countries where GDP is expected to grow this year. A “darling of multinational firms” who need to shift supply chains out of China, the nation is proving a “refuge” from the squalls of the trade war and deglobalisation.
Vietnam is “an economy to be reckoned with”, agrees Craig Mellow in Barron’s. Yet the investment picture is more complicated. Regulations limit foreign business ownership and “arcane trading bottlenecks choke liquidity”. It is for this reason that the country is still classified as a “frontier” rather than an “emerging” market, but there is no doubt that there is opportunity here for those willing to invest “carefully”. MoneyWeek’s favourite Vietnam play is VinaCapital’s Vietnam Opportunity Fund (LSE: VOF).
-
Should you invest in UK equities?
The FTSE 100 hit a record high this week, but UK equities remain unloved and undervalued compared to their global and US peers. Should you snap them up at a discount?
By Katie Williams Published
-
State pension errors: DWP urged to check for mistakes among divorced people
Former pensions minister Steve Webb says there are a high number of divorced women on low state pensions. Now MPs want the DWP to check if there were any errors in “potentially underpaying men and women who are divorced”.
By Ruth Emery Published
-
AstraZeneca CEO’s £1.8mn pay rise approved despite shareholder opposition
AstraZeneca hiked its dividend to persuade shareholders to accept CEO Pascal Soriot’s pay rise. Is he worth his salary?
By Dr Matthew Partridge Published
-
Adidas, Nike or Jordans - could collectable trainers make you rich?
The right pair of trainers can fetch six figures. Here's how you can start collecting vintage Adidas, Nike or Jordans now
By Chris Carter Published
-
The industry at the heart of global technology
The semiconductor industry powers key trends such as artificial intelligence, says Rupert Hargreaves
By Rupert Hargreaves Published
-
Three emerging Asian markets to invest in
Professional investor Chetan Sehgal of Templeton Emerging Markets Investment Trust tells us where he’d put his money
By Chetan Sehgal Published
-
What to consider before investing in small-cap indexes
Small-cap index trackers show why your choice of benchmark can make a large difference to long-term returns
By Cris Sholto Heaton Published
-
Why space investments are the way to go for investors
Space investments will change our world beyond recognition, UK investors should take note
By Merryn Somerset Webb Published
-
Time to tap into Africa’s mobile money boom
Favourable demographics have put Africa on the path to growth when it comes to mobile money and digital banking
By Rupert Hargreaves Published
-
M&S is back in fashion: but how long can this success last?
M&S has exceeded expectations in the past few years, but can it keep up the momentum?
By Rupert Hargreaves Published