Asia is emerging as the epicenter for investor worries over global growth and the spread of coronavirus variants. While their peers in the U.S. and Europe remain near record highs, Asian stocks have fallen back in recent months amid slowing Chinese economic growth and a glacial rollout of vaccines. The trend accelerated Friday with the benchmark MSCI Asia Pacific Index briefly erasing year-to-date gains for the second time in as many months.
“Asia was seen as the poster child in pandemic response last year, but this year the slow vaccination rollout in most countries combined with the arrival of the delta variant means another lost year,” said Mark Matthews, head of Asia research with Bank Julius Baer & Co. in Singapore. “I suspect Asia will continue to lag as long as vaccination rollouts remain at their relatively sluggish levels and high daily new Covid counts prevent them from lifting mobility restrictions.”
The growing jitters in the region comes as investor concerns shift from runaway inflation to an early withdrawal of stimulus by central banks. China’s authorities signaled earlier this week they may soon unleash more support for the economy, suggesting the world’s fastest-pandemic recovery may be weaker than it appears.
A fresh regulatory crackdown on Chinese tech stocks this week has also impacted investor sentiment in the region. The Hang Seng China Enterprises Index fell briefly into a technical bear market Friday, led by weakness in the sector.
While Asia bore the brunt of the retreat in global equities, havens in other asset classes from Treasuries to the yen have rallied, and the rotation toward economically-sensitive cyclical stocks from their high-priced growth counterparts continued to unwind.
“It’s a sign of how challenging the reopening process is,” Marvin Loh, State Street senior global market strategist, said in an interview with Bloomberg TV. “What the PBOC is going through as well as these variants that keep popping up around the world shows it’s going to be an uneven process. Maybe a normalization tightening policy is not necessarily going to be as fluid.”
Covid 19 remains a key challenge. In Japan, Tokyo has declared a renewed state of emergency to combat the resurgent virus, banning spectators from the Olympics and pushing the Nikkei 225 Stock Average toward a correction. South Korea is intensifying social distancing measures in Seoul while Indonesia is battling a virus resurgence that has crippled its health system.
“Asian equities are being particularly impacted by the rebound in coronavirus cases in the region, fears about the impact of that on regional growth and concern that we may now have seen the best of the rebound globally,” said Shane Oliver, head of investment strategy with AMP Capital Investors in Sydney. “Asian shares may have led the way on this but coronavirus concerns may also weigh on global shares generally.”
For the APAC region, recent trade deals will likely invigorate and deepen economic integration over the coming few years. In late 2020, China, Japan, South Korea, Australia, New Zealand and 10 Association of Southeast Asian Nations (ASEAN) members signed the Regional Comprehensive Economic Partnership (RCEP) agreement after eight years of negotiation.
When fully implemented in 2022, RCEP will represent the world’s biggest trading bloc, covering about 30% of global GDP and trade. In addition, China concluded a Comprehensive Agreement on Investment (CAI) with the EU on the last day of 2020. The EU is China’s second-largest trading partner and the CAI will cover broad market access, including to key sectors such as alternative energy vehicles and medical services.
Although these trade deals will not have an immediate economic impact, in the medium term the treaties should cement Asia as the world’s most dynamic economic bloc embracing free trade, investment and globalization. They should also help to counter the disruptive geopolitical tensions and encourage the post-pandemic economic recovery in Asia.
- ““World Population prospects – Population division““. population.un.org. United Nations Department of Economic and Social Affairs, Population Division. Retrieved November 9, 2019.
- ““Overall total population” – World Population Prospects: The 2019 Revision” (xslx). population.un.org (custom data acquired via website). United Nations Department of Economic and Social Affairs, Population Division. Retrieved November 9, 2019.
- “GDP Nominal and PPP Data, current prices”. International Monetary Fund. 2018. Retrieved 6 March 2018.
- World Economics Mar. 2016 Retrieved on May 16, 2017
- “IMF (WEO April 2017 Edition) GDP nominal per capita – international dollar”.
- “Asian Millionaires Outnumber Those in North America, Report Says”. Bloomberg. 19 June 2012.
- “Population of Asia in 2014”. World Population Statistics. Retrieved 25 November 2014.
- “http://www.imf.org/external/datamapper/NGDPD@WEO/OEMDC/ADVEC/WEOWORLD”. http://www.imf.org. External link in
- “Global wealth report”. http://www.credit-suisse.com. Credit Suisse. Retrieved October 25, 2019.
- “Global wealth report 2019” (PDF). Credit Suisse. Retrieved October 25, 2019.
- “Global wealth databook 2019” (PDF). Credit Suisse.
- “Asian Economic Integration Reports”. 2014-10-15.
- “The Asian Tigers from Independence to Industrialisation”.
- “Asian Development Outlook (ADO) Series”. 2017-11-21.
- “Asia: Resources”. 2012-01-04.
- “Report for Selected Countries and Subjects”. Retrieved December 28, 2019.
- “Professor M.D. Nalapat. Ensuring China’s “Peaceful Rise”. Accessed January 30, 2008″. Archived from the original on January 10, 2010.
- Dahlman, Carl J; Aubert, Jean-Eric. China and the Knowledge Economy: Seizing the 21st Century. WBI Development Studies. World Bank Publications. Accessed January 30, 2008. World Bank Publications, P. 2000-11-30. ISBN 9780821350058.
- “The Real Great Leap Forward. The Economist. Sept 30, 2004”. The Economist.
- “Chris Patten. Financial Times. Comment & Analysis: Why Europe is getting China so wrong. Accessed January 30, 2008″. Archived from the original on 2012-12-06.
- “Colonial Rule”. National Humanities Center.
- “Meiji Restoration”. Encyclopædia Britannica. Retrieved 25 November 2014.
- “Sino-Japanese War”. Encyclopædia Britannica. Retrieved 25 November 2014.
- “Manila galleon”. Encyclopædia Britannica. Retrieved 25 November 2014.
- “History of Philippines”. Nations Online. Retrieved 25 November 2014.
- “East India Company”. Encyclopædia Britannica. Retrieved 25 November 2014.
- “Dutch East India Trading Company”. Encyclopædia Britannica. Retrieved 25 November 2014.
- Alfred, Randy (2008-05-26). “May 26, 1908: Mideast Oil Discovered – There Will Be Blood”. Wired. Retrieved 25 November 2014.
- “World War 2 in the Pacific”. Holocaust Encyclopedia. Retrieved 25 November 2014.
- “Getting Globalization Right: The East Asian Tigers”. OECD Insights.
- “The East Asian Miracle” (PDF). National Bureau of Economic Research.
- Allen, G.C. (1959). “Japan’s Economy recovery”. The Journal of Economic History. 19 (2): 278–279. doi:10.1017/S0022050700110034.
- “Seoul’s Green Revolution”. Time. 2002-10-07.
- “Hong Kong’s status as world’s freest economy threatened by Singapore, says Heritage Foundation”. South China Morning Post-Economy. 2014-01-14.
- “The Bamboo Network: Asia’s Family-run Conglomerates”. Strategy +Business.
- Murray L Weidenbaum (1 January 1996). The Bamboo Network: How Expatriate Chinese Entrepreneurs are Creating a New Economic Superpower in Asia. Martin Kessler Books, Free Press. pp. 4–8. ISBN 978-0-684-82289-1.
- “Korean War and Japan’s Recovery”. Office of the Historian.
- “Asianomics: Dynamics of Asia’s Economic Growth”. World Knowledge Forum. Retrieved 16 November 2014.