March China & Asian Market Insight: Reassessing the ongoing impact of Covid-19 SG

March China & Asian Market Insight: Reassessing the ongoing impact of Covid-19

AXA IM’s Senior Emerging Asia Economist, Aidan Yao, shares his latest macro views on China and Asian Market every month.

In this month’s video he talks about the ongoing impact of Covid-19 on China and Asia and its implications on investment.

Please find the full script below:

The unexpected discovery and spread of the novel coronavirus have dealt a heavy blow to the global economy and financial markets.

In China, where the virus was first detected, the economy was practically paralyzed by Beijing’s draconian measures to contain that virus, leading to widespread production suspension for almost a month.

While many of these measures have paid off – by limiting the spread of the epidemic – the substantial economic costs could potentially sink the economy into its worst quarterly contraction in Q1 since the late 1980s.

We do still expect a subsequent growth rebound once the outbreak is put to rest. The incoming monetary and fiscal stimulus should ensure the subsequent growth rebound will be a vigorous one.

However, the risks are clearly lying to the downside, not only because the battle against the virus internally could be prolonged, but there is increasing possibility of a reverse contagion as the domestic epidemic turns into a global pandemic.

Finally, the global financial markets have started to reassess their previously sanguine view about the coronavirus being confined only to China. The recent steep market declines and surge in volatility, suggest that many investors are starting to question this narrative and getting prepared for the worst-case scenario.

We are not as pessimistic as the market about the macro assessment, and that’s why we remain invested in China and wider Asian markets. However, the epic market movement over the last couple of days certainly warrant a rethinking of portfolio positioning and strategies.

We think an equity strategy that focuses on delivering stable income, and fixed income strategy that steers away from low-grade credit and volatile interest rate risks could enable investors to get through the troubled water over the coming weeks and months.   

Thank you very much and stay safe.