Thursday, July 30, 2020
Jian Shi Cortesi says we are seeing a return to growth in Asia and China, with economic activity already at 90% of normal levels.
Even if there is a second wave of infections, will we remain out of lockdown?
Governments around the world continue to juggle between protecting lives and protecting their economies. This tug of war is still going on. In the event of a second wave of infections, each government will try to make the best decisions regarding lockdowns based on specific situations. Ultimately, I think it is unlikely that we will see other stringent, nationwide lockdowns as we have seen before. When China saw another wave of infections in Beijing, the government quickly reacted to limit mobility in surrounding areas but did not introduce a large scale, nationwide lockdown.
Are we entering a ‘return to growth’ phase for markets and economies?
In Asia and China specifically, we are already seeing a return to growth. At the beginning of June, data indicated that economic activity had already resumed to circa 90% of normal levels. Some industries, such as industrials and manufacturing, are seeing faster recoveries. Other industries, such as travel and offline entertainment, are experiencing slower recoveries.
What does this mean for your asset class?
In our view, it makes sense to have healthcare exposure as the sector will provide assistance if there is a second wave of infections. We also believe it makes sense to focus on companies that will benefit from permanent behavioural changes of consumers due to Covid-19; for example, those companies facilitating working from home and those operating in growth areas, such as online education / healthcare as well as businesses benefiting from an accelerating penetration of e-commerce, video games and offline entertainment. In the meantime, we believe it also makes sense to look at recovery stories, such as the autos sector, which are likely to perform well in a cyclical recovery.
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is no indicator for the current or future development. Reference to a specific security is not a recommendation to buy or sell that security.