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Jakarta Post

China reopening signs of normalcy?

  • Andrew Ness


Singapore   /   Fri, May 22, 2020   /   09:22 am
China reopening signs of normalcy? Vendors wearing face masks prepare meat in a market in Wuhan, in ChinaĆ­s central Hubei province on May 18, 2020.Farmers in China are being offered cash to quit breeding exotic animals as pressure grows to crack down on the illegal wildlife trade that has been blamed for the coronavirus outbreak. (AFP/Hector Retamal )

Many investors think we could be on the cusp of a major global depression as a result of the coronavirus, but we don’t think that will happen. It’s been helpful to have our boots on the ground across mainland China and in Hong Kong so we can hear how our colleagues in the country and region have been dealing with getting back to normalcy, particularly those who had been in a government-enforced lockdown for much of the first quarter.

While we have seen a few clusters where the virus has resurged in recent days after lockdowns were eased, events by and large in China are giving us hope: the reopening of factories, migratory workers going back to work since January’s Chinese New Year celebrations, and industrial activity returning to at least 90 percent capacity utilization.

As other emerging economies come out of lockdown, we’ll be watching closely whether consumers will behave as they were before the coronavirus.

It’s too soon to describe what a broad economic recovery will look like, but we believe China and other trade-sensitive neighboring economies will have to be more reliant on domestic recoveries, given the short-term challenges they face with disrupted global trade routes.

Historically, many companies in China, Taiwan and South Korea that had large cash reserves attracted negative attention due to the potential impact such cash reserves could have on long-term profitability. While some cash reserves can be beneficial, having too much cash stockpiled rather than invested can mean it’s not being put to work to grow the business.

However, the massive piles of cash some companies today are sitting on could provide a vital buffer against the dour economic climate. Companies without such reserves, whether in Asia or the United States and United Kingdom, could suffer in comparison.

In our view, this helps us identify the survivors from this crisis—and potential winners from an investment standpoint. The balance sheets of more companies in Asia are tiled toward cash than in the US, UK or Germany.


We don’t think the virus will ultimately change those wants and needs.


Certain regions in Asia appear to be more resilient than others. Domestic recoveries in countries in North Asia, such as South Korea, Taiwan and mainland China in particular, appear more robust. The countries also seemed better prepared to deal with the coronavirus than some other developed parts of the world.

Looking ahead, it raises bigger questions over characterizations of a developed economy—whether average wealth levels, or a country’s preparedness to protect its citizens in periods of crisis—should fall under the definition.

While the economic impact of the virus will weigh on many emerging market economies in the short term, the consumer trends we’ve been witnessing for some time are likely to remain relevant.

Goods and services related to health and wellness were a fast-growing trend prior to the crisis, and we think this theme will remain broadly intact postcrisis—perhaps even more so.

Additionally, there is strong demand for goods and services such as cars, high-speed broadband, life insurance and home ownership (and therefore, banking products like mortgages) in emerging markets, where penetration remains low. We don’t think the virus will ultimately change those wants and needs.

Middle-class and affluent consumers in Taiwan, China, India, Russia and Brazil, for example, should carry on trading up for higher-quality goods and services, as consumers in developed markets have done.

To us as investors, those areas represent potential opportunities as we move past the current crisis period.


Portfolio manager at Franklin Templeton Emerging Markets Equity

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.

If you want to help in the fight against COVID-19, we have compiled an up-to-date list of community initiatives designed to aid medical workers and low-income people in this article. Link: [UPDATED] Anti-COVID-19 initiatives: Helping Indonesia fight the outbreak