In the previous update, we addressed immediate concerns regarding the US’ and Swiss’ banking sector and continue to believe that the systemic risk has been contained effectively. As a result of these events, there have been concerns from analysts on the overall health of the US economy over the medium-term. We believe that we are currently going through a turning point and will continue to closely monitor economic data and corporate earnings to corroborate our outlook on the global economy. To us, this is also the outcome of a new asset pricing regime as interest rates return to normal and central bank liquidity tightens. Investors will correspondingly adjust their risk-return considerations in this new normal.
We would like to briefly address China’s post-reopening recovery, which has been slower than our expectations thus far. We strongly suspect this is the result of a severely weakened consumer sentiment in China as a result of the COVID lockdowns throughout 2022. Aside from that, monetary policy was not loosened massively to stimulate consumer spending, unlike in most developed countries. We expect China’s recovery to ramp up once consumer sentiment returns. One silver lining is that retail sales have recently accelerated in China, increasing by 10.6% year-on-year in March.
There has been increasing tension on the technological front between China and major developed countries. Japan officially announced plans to restrict exports of 23 types of semiconductor equipment to about 160 destinations, including China. Exports to these countries will require approval from Japan’s trade ministry. We also notice China has been increasingly protective of their leading technologies, such as electric vehicle batteries, photovoltaic panels and rare earth metals. We view export restrictions as a growing risk that could expand into additional industries moving forward. We have already been mindful of having large exposures in these industries since the US escalated their semiconductor export bans against China last year.
Our outlook is that growth in Asia continues to look more attractive than developed markets given the near-term recovery from China’s reopening, domestic economic recovery and resumption of foreign direct investments in the region. Having said that, we will maintain a nimble stance in the face of significant uncertainty in the global landscape.