Patrik Schowitz

Why Asian equities look a good bet in 2021 if global economic recovery continues

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Uncertainties remain, but the positive trajectory of global growth continues to march ahead. This should provide a good environment for emerging market stocks dominated by Asian export powerhouses that are dependent on the health of the world economy

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A farmer in Taizhao village in Shanxi province uses his phone to access information made available by technology such as GPS and unmanned aerial vehicles. Asian economies’ embrace of leading growth industries such as information technology has helped an economic recovery. Photo: Xinhua

Patrik Schowitz

Published: 10:00pm, 16 Oct 2020Updated: 2:19am, 17 Oct 2020

Political volatility and pandemic-related risks have dominated news headlines recently. Meanwhile, the global economy has quietly been on the mend.

After a deep recession in the second quarter as governments across the world locked down their economies to contain Covid-19, growth is bouncing back strongly and a new economic cycle has started.

The initial stage of the global economic recovery was explosive, supported simultaneously by reopenings as well as huge amounts of stimulus thrown at economies. On the fiscal side, this involved various forms of support for workers and companies hit by the pandemic while Western central banks supported financial markets by buying or guaranteeing an unprecedented range of official and private types of debt.

This recovery will inevitably slow down from here, and there are a large number of uncertainties looming towards the end of this year – the US election and a possible Covid-19 resurgence sit atop the list. The positive trajectory of global economic growth continues to march ahead, though, with ongoing official stimulus ready to be deployed until a coronavirus vaccine is made available.

A man passes container ships docked at the Port of Busan in Busan, South Korea. Asian export powerhouses such as China and South Korea are highly dependent on the health of the global economy. Photo: Bloomberg

That should be a good environment for emerging market stocks dominated by the Asian export powerhouses such as China and South Korea, which are highly dependent on the health of the global economy. Together these markets account for nearly 70 per cent of the emerging equity universe.