Important information

The information contained in this website is intended strictly for sophisticated institutions.

The information contained in this website, does not constitute and should not be construed as an offer of, invitation or proposal to make an offer for, recommendation to apply for or an opinion or guidance on a financial product, service and/or strategy. Whilst great care has been taken to ensure  that  the  information  contained  in  this  website is  accurate,  no  responsibility  can  be accepted for any errors, mistakes or omissions or for any action taken in reliance thereon. You may only reproduce, circulate and use this website (or any part of it) with the consent of Capital International Management Company Sàrl (“CIMC”), 37A avenue J.F. Kennedy, L-1855 Luxembourg.

The information contained in this website is for information purposes only. It is not intended for and should not be distributed to, or relied upon by, members of the public.

The information contained in this website, may contain statements that are not purely historical in nature but are “forward-looking statements”. These include, amongst other things, projections, forecasts  or  estimates  of  income.  These  forward-looking  statements  are  based  upon  certain assumptions, some of which are described in other relevant documents or materials. If you do not understand the contents of this website, you should consult an authorised financial adviser.

Capital IdeasTM

Investment insights from Capital Group

Categories
Fixed Income
China reopening should benefit parts of EM Asia
Koon Chow
Investment Analyst
Stephen Green
China economist Based in Hong Kong
February 24, 2023

Spillovers from China’s reopening will be mostly positive. The main channels are through tourism, goods imports and commodity prices.


While tourism out of most countries started to recover in 2021/22, the recent pick up domestic and online ticket searches suggest that it is only just starting in China, helped by the easing in travel restrictions. The greatest impact is likely to be felt by countries close to China and those with large tourism sectors, such as Thailand, Singapore and Korea.


Chinese imports fell sharply in the second half of 2022 due to weighing on global goods demand1. While China’s rebound is likely to be felt more strongly within services, goods imports should also pick up as consumption rises.  Again, the effect will be felt most strongly in Asia, in particular Malaysia, Korea and Thailand.


Exports to China

Exports to china

Data as at December 2022, except for India and Thailand where data is as at November 2022. Source: CEIC

China is a major importer of commodities and so a recovery in Chinese demand should support co    mmodity prices. This should benefit commodity-oriented exporters, including countries in the Middle East (oil), Latin America (iron ore, copper etc) and South Africa (precious metals). Meanwhile, higher commodity prices are likely to be a small drag for commodity importers, most of which are in Asia and mixed for Latin America and the EMEA region.


Current account positions in Korea, Thailand and Malaysia should all be helped by China’s reopening, pushing them all into (more) solid surpluses. While all three currencies are likely to benefit from this, the Thai baht is likely to see the strongest support. The Chinese yuan, meanwhile, is expected to stabilise from here as stronger portfolio inflows are likely counterbalanced by a deterioration in China’s current account balance. 


 


1. As at 23 January 2023. Source: Goldman Sachs


Koon Chow is a fixed income investment analyst at Capital Group with research responsibility for China and emerging Asian sovereigns focusing on both eurobond and local currency instruments. He holds a master's degree in economics for development from Oxford University and a bachelor's degree in economics from Cambridge University. Koon is based in Singapore.

Stephen Green is an economist at Capital Group, responsible for covering Asia. He has 18 years of investment industry experience and has been with Capital Group for eight years. He holds a PhD in government from the London School of Economics and a first-class honours degree in social and political sciences from Cambridge University. Stephen is based in Hong Kong.

Learn more about
Fixed Income
Emerging Markets
China
Download PDF

Our latest insights

RELATED INSIGHTS

Past results are not predictive of results in future periods. It is not possible to invest directly in an index, which is unmanaged. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.

Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.