Delta variant and markets: China the key, India can do well, says Julius Baer
While the overall global trend for COVID-19 cases continues to be downward - driven by falls in India, Europe and the US - cases are again rising in many countries, which are leading to renewed restrictions and even lockdowns in some cases. Many of these countries are blaming the delta variant of the coronavirus. What does this mean for markets? Geoffrey Dennis, Independent Emerging Markets Commentator and Mark Matthews of Bank Julius Baer weighed in.
While the overall global trend for COVID-19 cases continues to be downward - driven by falls in India, Europe and the US - cases are again rising in many countries, which are leading to renewed restrictions and even lockdowns in some cases. Many of these countries are blaming the delta variant of the coronavirus. What does this mean for markets? Geoffrey Dennis, Independent Emerging Markets Commentator and Mark Matthews of Bank Julius Baer weighed in.
Emerging economies might feel the brunt of a new wave but they are unlikely to ruffle the big players.
“I think the delta variant is absolutely a concern. The gross domestic product (GDPs) of Bangladesh, Thailand, Malaysia, Indonesia, Australia, South Africa is USD 2.8 trillion and that is less than the size of the economy of California. So it is unfortunate what is happening there but are they going to take down the global stock market? Most definitely not,” said Matthews.
The countries that looked to have survived this pandemic pretty well earlier on might also be in focus. For example. Australia reported a slight rise in COVID19 infections on Tuesday, while officials in several states tightened movement curbs and pushed for vaccinations to limit flareups of the highly infectious variant.
When asked about his preference within the Asian market region, Dennis said China's performance was the key.
“As I look at the Asian markets, the main reason why the emerging markets (EMs) have underperformed developed markets (DMs) this year is that China has lagged. China overall has done poorly. So I am looking very closely at China now because they are ahead of the game in terms of a little bit of monetary tightening to keep economic growth under control and to keep the debt situation under control,” he explained.
Where does India stack up?
“I wouldn’t look at the markets where you are seeing these lockdowns, where you are seeing increased risk on coronavirus front. I think Taiwan does well, Korea does well and India has the potential to do well also once we get a better grip on coronavirus in India,” he explained.
According to Matthews, every stock market has a different composition.
“India is a very cyclical and domestic stock market. I was very surprised by the outperformance of India, I wasn’t expecting it. I am happy that it happened because we are overweight the Indian market,” he stated.
For the full interview, watch the accompanying video.
(Edited by : Abhishek Jha)
First Published: Jun 29, 2021 3:33 PM IST
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