2023 Q1 In Review - Integrity Wealth Advisors, Ventura & Ojai, California

REBOUNDING EMERGING MARKET
PROFITS HELPED BY CHINA REOPENING
2022 was a miserable year for both companies and investors in emerging markets. Profits fell 15% (in contrast to solid gains in most developed countries), and
the MSCI Emerging Markets Index lost 15%. Over the past five years, the index is down 20%.
This picture may be changing for the better. The all-important Chinese economy is now in full recovery mode following the rapid abandonment of highly
restrictive anti-pandemic policies at the start of this year. We think that shift will unleash a consumption boom fueled by almost $500 billion USD of surplus
savings accumulated during the lockdowns. Many Chinese companies were forced to restructure during the past few years, and they are much better
positioned to profit in the recovery.
CHINESE HOUSEHOLDS HAVE ADDED MORE THAN 3 TRILLION RMB (USD 500 BILLION) OF SURPLUS SAVINGS.
Households accumulative surplus savings
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
Dec '13
Jun '14
Dec '14
Jun '15
Dec '15
Jun '16
RMBtr
Dec '16
Jun '17
Dec '17
Jun '18
Dec '18
Jun '19
Dec '19
Jun '20
Dec '20
Jun '21
Dec '21
Jun '22
Dec '22
Source: Haitong Securities, National Bureau of Statistics; data as of December 2022
Outside China, we find plenty of growth across emerging markets. The research team from JP Morgan sees higher profits in India, Indonesia and Taiwan this
year. Certainly, emerging markets have proved disappointing for quite a while, and the usual political risks have not disappeared. But with profits outperforming
the developed world for a change, and valuations still at very reasonable levels despite the recent bounce in China, patient investors may well be better
rewarded this year.
Source: Global Equity Views | Asset Class Views | J.P. Morgan Asset Management (jpmorgan.com)