Global growth will accelerate in 2018, with more stable and predictable economic recovery amid growing global political uncertainties and frictions, according to Deutsche Asset Management, a division of the Deutsch Bank Group.
“With continuous economic recovery, global growth accelerates; we won’t see any recession in 2017 and 2018,” says Sean Taylor, Chief Investment Officer – Asia Pacific, at Deutsche Asset Management, at a media briefing. “Globalization is resuming, with solid trade growth seen in Singapore, Korea, and Taiwan.”
Taylor put the spotlight on China, saying it it is more positive on the country than back in November 2016, and is more bullish towards Chinese equities. It also expects China’s GDP growth to maintain at 6.3% in 2017 and 2018.
“The international markets are probably too worried about the China market. We expect a more robust China, especially this year,” says Taylor.
The company lists three key drivers of the Chinese economy: “One Road One Belt” resulting in continuous but more selective Chinese outbound investments; ongoing SOE reform, and continuous growth in consumer confidence and spend.
Other positive indicators are China’s rising industrial production – both for domestic and export; an estimated 14% increase in infrastructure spending; and interest rates, which are expected to be up 2 to 3 times this year – but keeping policy rates low, thereby helping with upholding consumer confidence.
Impact of Trump’s policies
Taylor also highlighted the effects of President Donald Trump’s policies. From a US fiscal policy standpoint, there are three ways the Trump policies could impact emerging markets and more broadly Asia, according to Taylor.
First, there are differences in monetary policies – interest rate changes and US currency position would have a non-insignificant impact on Asia and Emerging Markets. Second, trade policies are still rather unclear; and third, how quickly infrastructure and fiscal stimulus are happening in the US would have international impact.
Within the next 12 months, senior leaders at the Fed will change; and DAM expects two to three rate hikes in 2017 and another three to four in 2018. It predicts that the US Fed will increase rates from 1.5% to 1.75% by March 2018.
Currencies and equities
DAM is also positive towards global equities, especially bullish towards emerging markets and the Asian markets overall. It expects China equities to outperform global equities.
DAM is also bullish towards the US dollar, due to interest rate differential with rate hikes. US assets are also looking better after Trump win, it said.