China to be first out of COVID-19 economic storm
From Q2, China’s growth is likely to accelerate as the rest of the world decelerates and it will be first out of this global storm stemmed from the COVID-19 pandemic, according to Saxo Bank.
In its Q2 outlook, the bank’s global macro strategist, Kay Van-Petersen, said investors needed to reset their expectations around fundamentals and earnings as policymakers dealt with the challenge of triple treats – a demand shock, a supply shock, and the destruction of capital in the energy market.
“While China has led the world with regard to the economic slowdown we’re experiencing – talks suggest Q1 China gross domestic product could be in the -10% to -20% range – we are also likely going to be entering a quarter or two where that slowdown ripples across the Eurozone and the US,” she said.
“Therefore, the paradox here is that from Q2 China’s growth is likely to accelerate as the rest of the world decelerates.
“Most of Asia will benefit from rising growth in China as China does about 50% of its trade with the region.”
Van-Peterson noted that with an eventual return to the service economy already happening with restaurant chains opening back up across the country, some provinces were claiming to be almost back to 100% normal.
“When looking at the economic impact of the current crisis, we have to take a step back and remember that this is what happens after the longest bull market run in history,” she said.
“However, with the Northern Hemisphere summer coming and the prospect of a potential breakthrough toward a vaccine there are potential advantages that Asia did not initially have.”
Saxo’s market strategist, Eleanor Creagh, said that while valuations had not become outright cheap there would come a time for bargain hunting.
“At that juncture, we likely enter a different investment paradigm. The extraordinary fiscal stimulus, a de-globalisation tailwind and recovery in economic activity will bring at the very least higher inflation expectations, and long-term bond yields may eventually rise,” she said.
“Perhaps we’ll see an opportunity to rethink diversification beyond the traditional 60/40 and a comeback for value, cyclicals and commodities.”
Recommended for you
Insignia Financial has reported net inflows of $448 million into its asset management division in the latest quarter, as well as popularity from advisers for its MLC managed accounts.
With ASIC questioning the dominance of research houses when it comes to retail usage of private market funds, a research house has shared how its ranking process sits alongside ASIC’s priorities.
Two Australian active fund managers have been singled out by Morningstar for their ability to achieve consistent performance and share price growth in the past 12 months.
Pinnacle Investment Management has expanded its private market coverage, forging a strategic partnership with a private markets manager via a 13 per cent stake acquisition.
