A tale of two continents
The panel also discussed the contrasting economic outlooks of Europe and Asia over the next six to 12 months. With war at Europe’s doorstep and its direct consequences, particularly on energy and food prices, the speakers reflected that there seemed to be a real sense of fear among policymakers of the income effect on wide swathes of the population. They reflected that the expectation for the continent to suffer a difficult recession in 2023, combined with other secular and cyclical factors, might also result in populist policies.
To avoid the full brunt of a downturn, the panellists stressed that cooperation within the European continent would be vital. They pointed out that the Russia-Ukrainian war had already precipitated some of this, and that relations between the United Kingdom and Europe had also showed signs of warming, with some movement to reduce frictions on trade underway. Even then, the panel recognised that Europe’s political situation remained volatile, with policymakers potentially reacting to the war and the changing economic situation in a diversity of ways, which would contribute to increasing unpredictability from an investor’s standpoint.
Meanwhile, Asia presented a far more optimistic picture for investors. The panellists noted that Asian markets would likely recover from an impending recession sooner than their European counterparts. Fund managers are already making a beeline for places like Southeast Asia, as the region’s stability and growth prospects make it far more attractive. From manufacturing solar-powered batteries to exporting nickel, Asia remains a bright spot.
On China, while the panellists recognised that investors would have to remain careful, undertake extensive bottom-up due diligence, and even opt for more liquid investments, they concurred that it should remain a part of any investor’s portfolio. The key would be to understand the politics and what the Chinese government’s policy stances mean. They said that it was now clear, based on the latest Party Congress, that the country would be pursuing “modernisation with Chinese characteristics”. This approach, they explained, emulates specific government policies from other countries, such as housing or education, but tailors them for China. It also potentially opens up opportunities in investing in the green economy and social sectors.