Emerging markets were the star performer for the quarter led by a surge in Chinese economic activity. The MSCI Emerging Market Index increased in value and outperformed the MSCI World Index. This was evidenced by the Chinese economy growing 3.2% y/y in Q2 of 2020, reversing a – 6.8% contraction in Q1 and beating market consensus of 2.5% growth amid relaxed lockdown measures.
China’s economic recovery is however somewhat vulnerable to losing momentum as key trading partners struggle with resurgences of the deadly coronavirus and resort to fresh measures to control its spread. Tensions with the U.S. escalated during the quarter including new restrictions on Chinese company Huawei and President Trump’s executive order preventing US companies from doing business with TikTok and WeChat. Chinese Q2 earnings results were also ahead of expectations particularly in the e-commerce sector.