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China Could Be a Growth Engine for Global Recovery in 2H 2020: Co-CIO, Head of International and Global Strategies Nick Niziolek

In a turbulent period for the markets, Calamos is hosting a CIO Conference Call Series for financial advisors. Below are notes from a call Wednesday, March 18, with Nick Niziolek, CFA, Co-CIO, Senior Co-Portfolio Manager. As Head of International and Global Strategies, he leads the team that manages Calamos International Growth Fund (CIGIX) and Calamos Evolving World Growth Fund (CNWIX). To listen to the call in its entirety, go to

Global markets have not yet reached a bottom, but Nick Niziolek believes the global economy and markets could be in recovery mode by the second half of the year, with China and other overseas markets making strong contributions. The Calamos international portfolios remain focused on preserving capital during these volatile markets, while also being positioned ahead of positive inflection points.

Summary of Key Views

  • The trajectory of the coronavirus outbreak will be different in the U.S. versus what’s been seen in Asia, with cultural differences and technological factors helping containment efforts in Asia.
  • Vaccine progress, mitigation progress, and the global fiscal/monetary response are three key factors that will alleviate market uncertainty; the team is viewing economic data through this tri-fold lens to determine when to begin significantly re-risking portfolios.
    Nick Niziolek

    “The names that are working the best are primarily in China and Asia, with many focused on online shopping/medical/education and software…there are likely to be more cyclical growth opportunities in China, as fiscal stimulus ramps up.”

    Nick Niziolek, CFA, Co-CIO, Senior Co-Portfolio Manager and Head of International and Global Strategies
  • Based on what has occurred in China and Italy, a peak in new cases—a deceleration in growth rates—will be crucial in helping the market find its bottom. We expect markets will begin to recover before the war against the coronavirus is won—investors will be encouraged once they see the U.S. is committed to defeating the virus.
  • The global economy and markets may well be in recovery mode by year-end, with strength in overseas companies and cyclical growth.
  • The Calamos global and international portfolios were well served by aggressive de-risking as the coronavirus outbreak began.
  • Portfolios include names benefiting from e-commerce, e-learning and e-medical tailwinds.
  • Data is likely to get worse from here and the team is cautious near-term, but at these levels there are opportunities to begin re-positioning for the anticipated recovery, including in cyclical growth.

Understanding the Economic Shock: Three Factors Provide Guideposts

  • Three factors will be decisive in defining the depth of the shock occurring in the U.S. and global economies, as well as the timeline for recovery.
  1. Vaccine progress.
    • A viable vaccine and a production schedule for broad implementation would be the golden ticket to give the market the certainty it wants. However, despite the positive developments announced, it is likely that a vaccine is at least several quarters out.
  2. Mitigation progress—differences between countries will produce different outcomes.
    • The Calamos team is focused on the degree to which social distancing may be implemented, given the significant impacts to economic and market activity.
    • Many market participants are looking to Asia as an example of how the U.S. may respond to the coronavirus, but technology and cultural differences in Asia have put China, Japan and South Korea in a better position to mitigate the spread of the virus.
    • Referencing his extensive travel in Asia, Nick noted that in Hong Kong, it’s possible to travel from a hotel to an airplane seat without interacting with one human. Additionally, in many Asian countries, it is very common for people who are ill to wear masks to protect their peers.
    • China’s government may have employed strategies well beyond what the U.S. would be willing to—or capable of—executing. For example, there are indications that China utilized facial recognition software, heat-sensing cameras, and cell phone networks to identify and quarantine unhealthy individuals and their contacts. A combination of drones, physical enforcement, GPS monitoring, and camera surveillance ensured individuals remain quarantined.
    • South Korea continues to lead the world in testing. While testing can’t prevent the spread of the virus, it does allow for the effective quarantine of infected individuals.
    • Looking beyond Asia, there are also key differences between the U.S. and Italy, such as more elderly citizens and more smokers in Italy; this suggests that the outcome in the U.S. might not be as dire as what has occurred in Italy.
  3. Fiscal and monetary response can catalyze recovery
    • From a monetary policy perspective, the Fed finally fired its bazooka over the weekend and has followed with programs designed to improve liquidity.
    • Global central banks have also eased, although more likely needs to be done.
    • Europe has responded with significant stimulus packages. The prospect of a joint-debt offering, the first stage in a fiscal union—is especially encouraging, in Nick’s view.
    • The fiscal program coming out of the U.S. sounds significant, which could provide a floor and allay fears of a potential global depression.
    • Likening the battle against the coronavirus to war, Nick notes that markets will be encouraged by decisive action by the White House, even as the fight against the outbreak rages on.

Emerging Market Equities Are Benefiting from a Better Outlook for China

  • The recovery in China is real, asserts Nick. Official economic data coming out of China often warrants a degree of skepticism, but Nick and his team work to independently verify the picture painted by government-provided economic figures—for example, by analyzing traffic data, pollution data, and electricity consumption.
  • The team’s recent conversations with European company CEOs and CFOs who distribute and manufacture within China have also been encouraging; supply-shock risk is abating.
  • Historically, China has been hesitant to launch a full-scale stimulus program due to fears of stoking inflationary pressures. With inflation less of a concern, the team anticipates that China will implement large-scale stimulus programs once the government is confident supply is back on-line and the virus has been contained. These could differ from what was seen in 2009, and be more domestic in focus.

Investment Opportunities

  • In the very near term, the names that are working the best are primarily in China and Asia, with many focused on online shopping/medical/education and software.
  • Looking further out, there are likely to be more cyclical growth opportunities in China, as fiscal stimulus ramps up.
  • The team expects a similar playbook in developed markets, assuming the monetary/fiscal/mitigation steps are as aggressive as they have been and are expected to be in China.
  • Nick’s team remains cautious on European banks. While central banks are likely to provide sufficient liquidity and the team doesn’t anticipate a crisis, they believe there are more attractive places to allocate capital.

Before investing carefully consider the fund’s investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-800-582-6959. Read it carefully before investing.

Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. The views and strategies described may not be suitable for all investors. References to specific companies, securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to buy or sell. Investing in non-U.S. markets entails greater investment risk, and these risks are greater for emerging markets. The above commentary for informational and educational purposes only and shouldn’t be considered investment advice.


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