Stock markets can run, but they can’t hide, from post-pandemic challenges

Name: Double-swing bridge spins into place in northern China
Uploaded: 2021-01-10T19:30:10.000Z
Duration: 1 min 2 s
Description: Double-swing bridge spins into place in northern China

As the focus shifts to dealing with climate change and other socioeconomic challenges, investors will have to abandon short-term love affairs with glamour stocks and settle down to a long-term relationship with sustainable investment

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People wearing face masks attend a New Year countdown in Wuhan, China, on December 31, 2020. While international investors are flocking to China’s stock market, attracted by the country’s economic indicators, eventually they will have to contend with the many economic challenges posed by the coronavirus pandemic globally. Photo: AFP

Anthony Rowley

Published: 3:30am, 11 Jan 2021Updated: 3:48am, 11 Jan 2021

A recent rush of international funds into Chinese stocks heralds what is likely to be a series of unexpected developments in stock markets in 2021. This will be a year when markets need to get real about the financial challenges facing the post-Covid-19 world – or risk becoming irrelevant.

The corporate sector globally will need to find huge amounts of money (tens of trillions of dollars) as the focus shifts, post-pandemic, to dealing with climate change and a host of other socioeconomic challenges. This means calls on shareholders to cough up funds, and they will not welcome that.

It means, in effect, that the current decade will become more the “boring 20s” rather than the “roaring 20s” for stock markets as they are forced to abandon short-term love affairs with glamour stocks and settle down to a long-term relationship with more responsible and sustainable investment.

In the meantime, it is hardly surprising that investors are piling into Chinese equities. China has taken more care of social investment (in infrastructure, for example) than Western nations. Also, China was alone among major economies last year in recording economic growth and is set to outperform most others in 2021.

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Double-swing bridge spins into place in northern China

But there is more to what’s happening now than the perception (fast gaining ground) that China has got everything from economic and trade policy to Covid-19 control right while the US and others are floundering. There is a view that stocks in many advanced markets are turning into dross.