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Rethinking Defence in Volatile Markets – September Quarter

Markets fell into negative territory in September, with two emerging risks impacting investor sentiment:

  1. Slowing Growth in China – the near-collapse of property developer Evergrande sparked fears that it would trigger a broader economic slowdown. In addition, the Chinese government intensified its regulatory crackdown on the education and technology sectors as part of its ‘common prosperity’ initiative. Investors sold Chinese equities, fearing that societal/national objectives will take precedence to shareholder returns. Slowing economic growth in China more broadly is a theme that we have spoken often about over the course of 2021 as the world opens and consumer spending shifts from durables to services. This is evidenced by China’s September Manufacturing PMI which has declined for 5 months in a row now, to below 50.

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