Our study "The next digital superpower: scenarios for the conflict between the US and China and its impact on the world economy
Vontobel launches certificate for potential winners from the US / China trade conflict based on the study "The Next Digital Superpower"
The trade conflict between the USA and China has the potential to globally change the existing balance of power. There are countries, regions, and sectors that could benefit from possible shifts in trade flows. Together with Eurasia Group, Vontobel has examined various scenarios in the study "The Next Digital Superpower". Due to the great interest in this topic, Vontobel has now developed a product that allows investors to participate in the potential changes.
The financial markets have been under the spell of the trade conflict between the US and China for over a year now. Hardly a day goes by without new news moving the markets in one direction or another. However, the trade dispute is only part of a larger, deeper geopolitical shift. Ultimately, it's about the question of who will become the digital superpower of the future, according to the quintessence of a joint study by Vontobel and the independent American think tank Eurasia Group, which was presented in New York this fall. In the study - which can be obtained from Vontobel - Vontobel and Eurasia Group examine various scenarios with their respective possible effects on countries, regions, and sectors that could be affected by the shifts in power.
There are also winners in the trade dispute
In the most likely scenario from the experts' perspective, the trend towards shorter trade routes could make Latin America an attractive production location for the USA and Southeast Asia an attractive location for China. Countries such as Vietnam, Indonesia, Thailand, Bangladesh, Taiwan, Malaysia, and Mexico could benefit the most. Since the beginning of Sino-American trade tensions, foreign direct investments in some of these countries have already reached record levels.
Investing in the potential winners
To enable investors to participate in the possible reorganization of supply chains, Vontobel has developed a tracker certificate that focuses on those countries and sectors that could be among the profiteers according to the underlying scenario. The Vontobel Trade Conflict Winners Emerging Markets Index includes equities from selected emerging markets. The index universe comprises equities of companies in emerging markets that are valued using a point system based on more than 100 quantitative indicators. The index composition is adjusted at least every six months.
How the index would have developed in recent months
Vontobel has back-tested the index in its current composition. According to the test, the index strategy would have been confirmed since the beginning of 2018. This test says nothing about future performance and simulations are not reliable indicators of future performance. However, it does provide an indication: According to the simulation, the index would have moved in line with the MXFE Index until mid-2018, for example. From then on - especially as the trade conflict intensified further - the Vontobel Trade Conflict Winners Emerging Markets Index uncoupled itself and clearly outperformed the MXFE.
Vontobel Trade Conflict Winners Emerging Markets Index outperforms as of mid-2018
Source: Vontobel, Bloomberg as per October 2. Indication: Past simulations cannot be used to reliably predict future performance. Data for index rating is based on backtesting.
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