First in, first out: North Asian equities exhibit postpandemic strength

For emerging-market equity investors, the COVID-19 crisis helps to define a critical juncture. Some companies and geographies are showing deep vulnerabilities; others remarkable resilience. Focusing on the latter is the sustainable investment path ahead.

From a bottom-up standpoint, many of the structural themes that we see playing out across emerging markets have been reinforced―and in some cases accelerated―by the pandemic. The amplification of these trends can be seen in two key areas across emerging markets. First, while a range of companies has struggled in the face of a global health crisis and related economic challenges, a select group of firms within certain industries have shown remarkable resilience and even managed to accelerate their growth. A number of these standout companies are found today in industries that were already experiencing strong growth before the coronavirus outbreak, such as e-commerce, electronic payments, cloud computing services, data centers, online education, and online healthcare diagnostics.

The second distinction is geographic. Relative to other emerging markets, China, South Korea, and Taiwan have contained the crisis decisively, from a public health, economic, and policy perspective, creating a significant range of investment opportunities.

Pandemic-driven technological change

COVID-19 has highlighted the long-term potential for select companies that have been able to tap into structural growth themes and possess skilled management teams as well as sustainable business models. While the pandemic presents operational challenges, today’s work-and-shop-from-home environment has served as a tailwind, accelerating growth in commerce that can be conducted online and/or remotely. Think of electronic payments instead of cash, and virtual business meetings, medical appointments, and college classes rather than in-person interactions. These shifts have been made possible by technological advances and the proliferation of data to leverage off them.

The companies at the forefront of these changes are generally well ahead of their peers in integrating technology into their businesses, resulting in accelerating market share gains and sustainable growth. This technological transformation isn’t just a U.S. or developed-market phenomenon; many leading companies are emerging-market firms with increasingly global reach.

From an investment perspective, these trends present multitiered opportunities across emerging markets. For example, opportunities stemming from the rapid embrace of e-commerce in China can be applied to other emerging markets where e-commerce penetration is lower, creating a potentially long runway for growth and powerful network effects associated with well-designed business models. The challenge for investors is to identify such unrealized potential and target the companies best positioned to exploit these opportunities profitably.

Many of the structural themes that we see playing out across emerging markets have been reinforced―and in some cases accelerated―by the pandemic.

An uneven recovery across emerging markets

After COVID-19-related concerns drove global equities to recent lows in March, a recovery began to take shape as the pandemic came under varying degrees of containment in many regions and initial signs of economic stabilization emerged. In our view, the rise in equity valuations triggered by the recent rally made it increasingly important to focus security selection on the businesses and countries that we believe appear to be in the best long-term positions to manage through today’s economic constraints.

The importance of a targeted, selective investment approach is highlighted by the level of uncertainty caused by the pandemic and the changing market environment. Our favorable view of select emerging markets in north Asia reflects an assessment of their resilience during the current crisis and their relative strength based on their superior cost of capital. In this environment, we favor emerging markets where we have strong visibility into factors such as structural growth, liquidity, and currency depreciation risks; at the company level, we have increased our focus on firms where we have visibility relating to trends of revenue, free cash flow, and returns on invested capital.

China’s unique position

At the country level, China―and other north Asian markets, to a lesser extent―benefit from having been the first to encounter COVID-19 and to apply drastic lockdown measures, in addition to being the first to progress toward containing the outbreak. These countries and territories have enjoyed a further tailwind from the powerful and sustainable response of their central banks and governments relative to some other emerging markets. China, for example, stands out in that it maintains a degree of control over its economic outcomes that is perhaps rivaled only by the United States.

In our view, this power is a product not only of the government’s tight grip on the economy but of China’s large, skilled labor force, its high savings rate to fund domestic investments, and its ecosystem for domestic capital formation. These strengths give China the ability to launch economic stimulus programs in the face of a crisis like the current pandemic. Just as the U.S. Federal Reserve has recently been able to pursue interest-rate cuts and balance sheet expansion without much impact on the dollar’s value in currency markets,1 the People’s Bank of China has employed monetary measures without significantly depreciating the yuan.2

In our view, while policymakers across emerging markets have generally sought to maintain accommodative stances, only a few countries such as China may have the capacity to apply necessary monetary and fiscal tools to fuel sustainable recoveries amid heightened uncertainty. Many other emerging markets―particularly in Latin America―are burdened by constrained fiscal resources as well as inadequate public health provisions, leading to closed borders and lockdown measures that may be late compared with those across much of Asia.

Opportunities stemming from the rapid embrace of e-commerce in China can be applied to other emerging markets where e-commerce penetration is lower.

Navigating an uneven recovery

Across emerging-market equities, we see varying and potentially volatile speeds of growth resurgence and recession through at least the rest of this year. As investors, we’re monitoring the situation carefully and seek to respond accordingly—both to weather the volatility that we see as an inevitable by-product of economic disruption and to gain exposure to those companies that we believe present resilient growth opportunities. We continue to find many of these opportunities in industries that are at the forefront of today’s structural growth trends and are in the relatively strong emerging markets concentrated in north Asia.

1 “The world loves the US dollar. Trump and the pandemic could change that,” CNN, July 16, 2020. 2 “China's June forex reserves rise less than expected on buoyant yuan,” Reuters, July 7, 2020.

widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, and affect portfolio performance. For example, the novel coronavirus disease (COVID-19) has resulted in significant disruptions to global business activity. The impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other preexisting political, social, and economic risks. Any such impact could adversely affect the portfolio’s performance, resulting in losses to your investment.

Investing involves risks, including the potential loss of principal. Financial markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. These risks are magnified for investments made in emerging markets. Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of a portfolio’s investments.

The information provided does not take into account the suitability, investment objectives, financial situation, or particular needs of any specific person. You should consider the suitability of any type of investment for your circumstances and, if necessary, seek professional advice.

This material, intended for the exclusive use by the recipients who are allowable to receive this document under the applicable laws and regulations of the relevant jurisdictions, was produced by, and the opinions expressed are those of, Manulife Investment Management as of the date of this publication and are subject to change based on market and other conditions. The information and/or analysis contained in this material has been compiled or arrived at from sources believed to be reliable, but Manulife Investment Management does not make any representation as to their accuracy, correctness, usefulness, or completeness and does not accept liability for any loss arising from the use of the information and/or analysis contained. The information in this material may contain projections or other forward-looking statements regarding future events, targets, management discipline, or other expectations, and is only as current as of the date indicated. The information in this document, including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Manulife Investment Management disclaims any responsibility to update such information.

Neither Manulife Investment Management or its affiliates, nor any of their directors, officers, or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein. All overviews and commentary are intended to be general in nature and for current interest. While helpful, these overviews are no substitute for professional tax, investment, or legal advice. Clients should seek professional advice for their particular situation. Neither Manulife, Manulife Investment Management, nor any of their affiliates or representatives is providing tax, investment, or legal advice. This material was prepared solely for informational purposes, does not constitute a recommendation, professional advice, an offer, or an invitation by or on behalf of Manulife Investment Management to any person to buy or sell any security or adopt any investment strategy, and is no indication of trading intent in any fund or account managed by Manulife Investment Management. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Diversification or asset allocation does not guarantee a profit or protect against a loss in any market. Unless otherwise specified, all data is sourced from Manulife Investment Management. Past performance does not guarantee future results.

Manulife Investment Management

Manulife Investment Management is the global wealth and asset management segment of Manulife Financial Corporation. We draw on more than a century of financial stewardship to partner with clients across our institutional, retail, and retirement businesses globally. Our specialist approach to money management includes the highly differentiated strategies of our fixed-income, specialized equity, multi-asset solutions, and private markets teams, along with access to specialized, unaffiliated asset managers from around the world through our multimanager model.

These materials have not been reviewed by and are not registered with any securities or other regulatory authority, and may, where appropriate, be distributed by the following Manulife entities in their respective jurisdictions. Additional information about Manulife Investment Management may be found at

Australia: Hancock Natural Resource Group Australasia Pty Limited, Manulife Investment Management (Hong Kong) Limited. Brazil: Hancock Asset Management Brasil Ltda. Canada: Manulife Investment Management Limited, Manulife Investment Management Distributors Inc., Manulife Investment Management (North America) Limited, Manulife Investment Management Private Markets (Canada) Corp. China: Manulife Overseas Investment Fund Management (Shanghai) Limited Company. European Economic Area and United Kingdom: Manulife Investment Management (Europe) Ltd.which is authorized and regulated by the Financial Conduct AuthorityManulife Investment Management (Ireland) Ltd., which is authorized and regulated by the Central Bank of Ireland Hong Kong: Manulife Investment Management (Hong Kong) Limited. Indonesia: PT Manulife Aset Manajemen Indonesia. Japan: Manulife Investment Management (Japan) Limited. Malaysia: Manulife Investment Management (M) Berhad (formerly known as Manulife Asset Management Services Berhad) 200801033087 (834424-U). Philippines: Manulife Asset Management and Trust Corporation. Singapore: Manulife Investment Management (Singapore) Pte. Ltd. (Company Registration No. 200709952G). South Korea: Manulife Investment Management (Hong Kong) Limited. Switzerland: Manulife IM (Switzerland) LLC. Taiwan: Manulife Investment Management (Taiwan) Co. Ltd. United States: John Hancock Investment Management LLC, Manulife Investment Management (US) LLC, Manulife Investment Management Private Markets (US) LLC, and Hancock Natural Resource Group, Inc. Vietnam: Manulife Investment Fund Management (Vietnam) Company Limited.

Manulife Investment Management, the Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates, under license.


Kathryn Langridge

Kathryn Langridge, 

Senior Managing Director and Senior Portfolio Manager, Emerging Markets Equity

Manulife Investment Management

Read bio
Philip Ehrmann

Philip Ehrmann, 

Senior Portfolio Manager, Emerging Markets Equity

Manulife Investment Management

Read bio
Talib Saifee

Talib Saifee, 

Portfolio Manager

Manulife Investment Management

Read bio