We are of the opinion that there are a number of high-level reasons to be positive on emerging markets (EMs) based on a combination of a Joe Biden presidency and a Republican Senate in the United States. First, we believe this election result is likely to cap US interest rates for longer and therefore weaken the US dollar, thereby inducing a flow of money into EMs, further benefiting those countries. Second, we could expect a softer policy stance toward China. Overall, EMs are holding strong and are expected to benefit from the Biden win, including better relationships as well as new trade deals.   ͏͏

While some countries have backed away from globalisation, not all countries are keen to disrupt existing trade relationships. In fact, many continue to seek renewed trade deals, deepening integration with others. Many recognise the benefits of free trade and the need to have rules-based organisations to govern trade agreements. On 15 November, China, Japan, South Korea, Australia, New Zealand and the 10 member states of the Association of Southeast Asian Nations (ASEAN) signed the Regional Comprehensive Economic Partnership (RCEP), which some have dubbed ‘the world’s biggest free trade zone’. The RCEP represents a significant regional trade bloc, covering about 30% of the world’s population and accounting for approximately 30% of global gross domestic product (GDP). As the Covid-19 pandemic continues to restrict global economic growth, this new partnership looks to provide a jump-start to growth.

In recent years, international supply chains have come under mounting pressure. As Sino-US rivalry has extended from trade to technology, we are seeing the development of ‘one world, two systems’ in which geopolitical considerations play an increasingly dominant role in driving technology and trade patterns. It is companies integral to global technology hardware production —supplying key products to both China and the United States—that may have to be most adaptive. As active, engaged investors, we identify three characteristics that may facilitate success: intellectual property, improving competitive dynamics and global diversification.

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