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International Equities

Emerging markets are likely to lead the way

Bearish vs bullish : developed and emerging markets.

China is leading the way in the global trade recovery

On a year‑over‑year basis, global exports for the five largest exporters in the world look to be improving, with China leading the way. The global trade outlook for 2021 is the strongest in two years. There’s renewed optimism towards global trade as we expect less disruption from tariffs/political posturing. Improved YOY export growth in China and South Korea should be shared by the United States, Japan, and Germany through 2021.

Year-over-year export growth by country

2013 ‑ current

Year-over-Year Export Growth by Country  2013 - Current

Data not available for China for January and February 2020, or for U.S. and Germany for November 2020.

Source: Manulife Investment Management, Bloomberg, as of November 30, 2020.

International equities may benefit from stronger economic growth

In their October World Economic Outlook, the International Monetary Fund projects that many regions around the world, especially emerging and developing Asia, could grow faster than the U.S. in 2021. While the near‑term economic downside could be worse, companies located in these growth regions should benefit from the strong economic rebound coming out of the various lockdowns.

Economic growth projections

Economic growth projections

Source: Manulife Investment Management, Bloomberg, as of November 30, 2020.

Copper prices indicate an accelerating Chinese economy

As China is the largest importer of copper, an increase in the price of copper is usually tied to an increase in demand from China. Due to its broad use throughout various industries, the price of copper is often seen as good indicator for the health of the Chinese economy. The recent increase in price should indicate an improvement in economic growth in China and could also lead to a stronger global economy.

Chinese imports vs Copper prices YOY change

2007 – current (with six‑month forward forecast)

Chinese imports vs Copper prices YOY change2007 – current (with six‑month forward forecast)

Source: Manulife Investment Management, Bloomberg, as of November 30, 2020.

Emerging market equities look attractive heading into 2021

Emerging market equities enjoy their best performance in an accelerating growth/inflation environment. Coupled with our view towards a weaker U.S. dollar through 2021, we believe emerging market equities have the potential to outperform developed market equities this year.

MSCI Emerging Markets Index vs U.S. Dollar Index (DXY)

2000 – current

Trailing 12-month return differential between S&P 500 and MSCI EAFE

Source: Manulife Investment Management and Bloomberg, as of December 31, 2020.

Manulife Investment Management’s sample strategy

Manulife Investment Management’s sample strategy

Canadian equities

• Favour a selective approach to Canadian equities.

• Consider diversifying business risks, not just sectors.

US Equities

• Look for opportunities to take advantage of market dislocations.

• Consider dollar‑cost averaging into equities.

International developed market equities

• Consider less constrained strategies that can seek out opportunities wherever they may present themselves.

Emerging Market equities

Opportunities may exist within the emerging markets, specifically in the Asia ex‑Japan region.

Fixed Income
• Favour flexible strategies that can seize opportunities wherever they may be.

•Consider using different types of bonds for different objectives, whether it is downside protection or enhanced yield.

•Be mindful of the potential currency impact on global allocations.

Source: Manulife Investment Management as of December 31, 2020. For illustration purposes only. Performance histories are not indicative of future returns. The information in this document does not replace or supersede KYC (know your client) suitability, needs analysis or any other regulatory requirements. Clients should seek the advice of professionals before making any investment decisions.