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How China is Attracting Money into their Country and out of the Western Countries

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How China is Attracting Money into their Country and out of the Western Countries

ASIA ─ The Asian market, being indirectly affected by the negative sentiment towards western economies, has proven to the world to be economically resilient. Meanwhile, the prospect of a technical recession looms in large western economies (such as the US and the United Kingdom) for what many experts view as a “too much, too soon” aggressive hike in their respective policy interest rates to curb some of the highest inflation rates these countries have seen in decades.

The world’s second-largest economy, China, is at the forefront of this possible massive inflow of investments in the Asian market, which has seen a massive foreign investment outflow from the country since it started to implement its “zero COVID-19” policy late last year. The grave restrictions during the ongoing policy have battered Beijing’s economic machines as lockdowns, and health protocols are strictly enforced in key provinces and cities. This resulted in a massive slowdown in economic output, thus negatively pricing it into its Financial Markets.

An opportunity for Bargain Hunting

Asian Financial Markets, including China’s, plunged as a result of internal factors (such as the renewed COVID-19 pandemic outbreak) as well as external factors, including the rising interest rates globally, the Russia-Ukraine Conflict, and the ongoing global supply-chain issues. However, an opportunity prevails as investors worldwide are now finding the valuation of Asian equities attractive.

In his observation, Robin Parbrook, Co-head of Asian Equity Alternative Investments at Schroders, pointed out the rising allure during this period in Asian equities. “We are now seeing opportunities to buy a wonderful company at a fair price. This was opposed to 18 months ago when we were often looking at buying “a fair company at a wonderful price,” he said.

This comes as an optimal period as China has recently loosened up its quarantine measures and is now starting to open up its country for an influx of tourism revenue and a renewed revitalization of its industries gravely affected by its previous strict implementation of health protocols. Thus, we could expect a rebound both in terms of Beijing’s economic output as well as its equities prices in short to medium term.

Asian Market’s Edge

Being on the other side of the world does not mean that Asian economies are not affected by global economic contraction however, the Asian market is arguably less affected by the world’s most consequential world events, such as the Ukraine-Russia war happening in the continent of Europe and the massive interest rate hikes being implemented by the US Federal Reserve and the Bank of England.

On top of these, Asian economies have sought more economic independence from western economies throughout the decades. This is especially the case with Beijing, as it is projected to bypass the US to become the world’s biggest economy within this decade. In addition, economic partnerships and cooperation (such as ASEAN and APEC) within Asia have been established to further foster economic interdependence and bolster the region as an alternative investment hub for international investment. An edge the region offers to international investors looking for attractive equities valuations.

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