Covid-19: Lockdown exit plans highlight divergence in emerging markets

China, S Korea stocks outperform as restrictions are rolled back

Emerging markets have rebounded over the past six weeks amid growing optimism they can ease lockdown restrictions and return their economies to normal. There’s still a long way to go.

Countries that are in the vanguard of restoring activity have been rewarded with stocks in China and South Korea outperforming their peers this year. The focus now turns to which economies have lagged behind, such as Indonesia and Brazil, but may now be able to catch up in loosening restrictions put in place to curb the coronavirus pandemic.

“Investors are seeing light at the end of the lockdown tunnel,” said Stephen Innes, chief global market strategist at AxiCorp Ltd. in Bangkok. “But people will be selective in buying assets, and they are looking for a convincing roadmap to exit lockdowns. Countries that are able to open up economies, while reducing the risk of another wave of infections will outperform.”

Here are the latest plans toward ending the lockdowns in some of the major emerging markets:

India

India is set to end its nationwide lockdown in about two weeks. Some restrictions have already been eased in urban areas that have reported no new infections. They include allowing industrial establishments and special economic zones to operate, as well as manufacturing of essential goods such as drugs and pharmaceuticals. The government relaxed some measures on April 20 to allow farmers and some industries to resume operations in rural areas and in districts that were free of infections. Small neighborhood stores have also been allowed to reopen. The rupee has dropped about 5 per cent this year, though it has pared losses from a record low set in April.

Indonesia

Indonesia, which refrained from putting in place a nationwide lockdown, expects a return to normal life in July. A partial lockdown in the capital Jakarta has been extended until May 22, while more cities and towns have also adopted social distancing measures. The rupiah has been the worst-performing Asian currency this year, losing about 8 per cent, while the stock benchmark has slumped more than 25 per cent.

Thailand

Thailand, whose currency is the second worst in Asia thisyear, is preparing to restart businesses nationwide, with a state of emergency set to end on May 31. The easing of

restrictions will take place in four stages and start with low-risk activities. More details will be announced in due course, the government said late last month.

Philippines

The Philippines has outlined a gradual reopening of its economy that may be implemented after a lockdown on key economic centers ends in mid-May. Construction and manufacturing will be allowed, as well as real estate and insurance activities. Restrictions in some provinces have been eased from May 1. Philippine stocks have the biggest losses in Asia this year after Indonesia’s.

South Africa

South Africa, whose currency has tumbled almost 24 per cent this year, eased some restrictions from May 1 as it plans a limited return of its workforce into the economy. Industries including mining and automotive manufacturing resumed operations, subject to strict precautions, while freight rail services also restarted.

Turkey

Turkey is deliberating restarting its economy with the resumption of some domestic flights as early as mid-May. Other steps that are being considered include resuming rail transportation and reopening schools. The government has placed 31 cities on lockdown during weekends and national holidays. The lira has lost about 20 per cent since the end of September.