Page 12 - April ISQ 2021

APRIL 2021

GDP (PPP) sector composition, 2017 (in percentage and in millions of dollars)

Country/Economy Total GDP (PPP)(US$MM) Agricultural Industrial Service

World 127,800,000 6.4% 30% 63%

China 23,210,000 7.9% 40.5% 51.6%

European Union 20,850,000 1.6% 25.1% 90.9%

United States 19,490,000 0.9% 19.1% 80.0%

India 9,474,000 15.4% 23.0% 61.5%

Japan 5,443,000 1.1% 30.1% 68.7%

Source: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_sector_composition

auspicious coming less than a week after a slightly grumpy first likely to be just a few years from overtaking the Chinese on this
meeting - held in Alaska - between representatives of the measure. Economically India is a generation behind China, but
recently inaugurated U.S. government and their Chinese coun- progress in the 2020s is likely to be striking with the world’s
terparts. fastest-growing tech hub helping to complement an economy
which should lead the IMF’s country growth statistics in 2021.
Unsurprisingly after a brief wait, the Chinese responded with
some of their own specific trade actions too, raising fears of a However elsewhere individual countries - admittedly with far
reversal to any freer trade efforts. This seems highly unlikely lighter MSCI Emerging Market index allocations, are having
given there are too many exports and imports ongoing between their own troubles. For example Brazil - despite some signifi-
these countries. In any case, the underperformance of the Chi- cant exposure to the important minerals sector - has struggled
nese stock market over recent months reflects a slightly with its COVID-19 challenges and even rising interest rates. Cer-
different evolution. Whilst the Chinese government did under- tainly economic growth levels too in Russia and South Africa
take a significant range of stimulus policies during their - among others - are also expected to be relatively dull com-
COVID-19 challenges over the first few months of last year, pared to many other nations, including the aforementioned
levels of stimulus (including central bank lending efforts) for emerging markets in Asia. Potential for later in the decade natu-
2021 appear extremely light compared to the United States or rally however remains for any emerging market name as all
in Europe. Some worry that the influence of timing efforts medium-term investors should be aware of.
between China and the United States specifically could mean
the latter - for the first time in around forty years - could gen- As is often the case with investment choices, picking and
erate a higher growth level this year. However with China not choosing is likely to matter and thoughts just forged on a single
only likely to beat 6% annual growth in a year which will mark quarter are rarely too insightful. Global emerging market
the one-hundredth anniversary of the Communist Party of investment opportunities still appear set to offer considerable
China, there is little likelihood of significant economic growth interest for many investors with a timescale of a few years into
disappointment. Meanwhile over this decade, the combination this decade.
of relatively low levels of Chinese debt plus the ongoing
increasing of Chinese service and technical sectors will provide KEY TAKEAWAYS:
a lot of natural stimulus.
• Emerging markets only have some characteristics of
And such a focus naturally does not also assist other aforemen- a developed market
tioned important emerging market countries such as South • Index allocations are centred in Asia led by China,
Korea and Taiwan but also India. Whilst the Chinese service South Korea, Taiwan and India.
sector GDP split at just over fifty percent is modest compared to
the near eighty percent levels in the U.K. or the United States, in • Dull recent performance in the Chinese stock market
India the equivalent figure is also modest. Additionally India - is unlikely to impact medium-term positives.
unlike China - has a youthful and fast growing population and is • India is likely to lead the IMF’s country growth statistics
in 2021.

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