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All eyes on China to kick-start potential recovery

26 March 2020

Global financial markets will be watching China’s economic recovery as a sentiment tracker, according to DeVere chief executive Nigel Green.

Green said: “Since the World Health Organisation upped its rhetoric on Covid-19 due to the rapid spread, financial markets have experienced wild bouts of volatility and major sell-offs. Investors are now not only monitoring the habitual markets like the price of gold and oil and international fiscal and monetary policies but they’re also tracking the global health policies and Coronavirus death tolls.”

Following the outbreak in China, Chinese authorities launched intense lockdown measures which appear to have been successful, but the adverse impact on its economy has been significant.

According to Green, investors will be closely monitoring how effective Chinese measures were, whether there will be a further outbreak and how the authorities plan to kickstart the economy.

He commented: “I’m confident that global financial markets will stage a relief rally when there is a definitive signal that the infection rate is dropping and that cases have peaked.  Investors will come off the sidelines and prices will jump. Therefore, the next stage in China’s public health and economic recovery is critical. What takes place in the People’s Republic will be used by investors as a sentiment guide and a gauge for the rest of the world, particularly the U.S. and Europe where Covid-19 transmissions are yet to peak.”

New investment destinations

In addition, Green expects investors to seek out ‘new world’ sectors and companies to grow and protect their wealth, with many industries hit with major supply and demand issues. Green pointed to the tech-heavy Nasdaq Composite index which has done well through the crisis as an example.

He explained: “New industries will come into their own and, as ever, there will be winners and losers.  This will mean job losses in some sectors and huge – possibly unprecedented – job and investment opportunities in others.”

Green said big tech is likely to fare well, with the likes of Amazon, Apple and Facebook in higher demand as a result of the isolation and quarantine effect. In addition, recently heightened regulatory restrictions and political opposition to their expansion and growing influence is likely to be scaled back “considerably.”

For similar reasons, Green also expects sectors such as pharmaceuticals, healthcare firms, delivery brands, supermarkets and manufacturers of electronic good such as fridges and freezers to do well.

Green added: “Of course, there will be a recovery from the global economic impact of coronavirus.  But the world has already changed as a result of it – and will do so more – and savvy investors are aware of this new normal and are already readjusting their portfolios accordingly. Times of immense tumult can be times of great ingenuity, promise and opportunity.”

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