IN FOCUS6-8 min read

Market shock: how did Hong Kong investors react to the impact of Covid-19?

The Covid-19 outbreak has undoubtedly caused an economic shock on a large scale by impacting global economies. Yet, a surprising proportion of investors responded by taking on more risk.


Faced by of one of the biggest economic shocks in history, it is little surprise that the vast majority of investors reacted by changing their portfolios. What is surprising however is that near one third of Hong Kong investors (32%) took the opportunity to raise their exposure to higher-risk investments.

The latest issue of Schroders’ Global Investor Study, a landmark annual survey of more than 23,000 investors from 32 worldwide locations conducted between 30 April and 15 June 2020, including 500 of them from Hong Kong, suggests a significant proportion of savers viewed February’s fall in share prices as an opportunity to invest further.

The survey probed savers about their actions following a period of extreme market volatility. This arose as most of the world’s major economies went into lockdown in an effort to limit the Covid-19 pandemic. Between mid-February and mid-March, world stock markets lost approximately one third of their value1.

A vast majority of Hong Kong respondents said they made some changes to their portfolio as a result. Only 12% said they kept their investments “where they were”. A small 3% were unaware of the turmoil in markets, and so took no action.

Of the 85% who did change their holdings as the crisis unfolded, there was a stark divergence in response. A total 58% said they moved “some” or “a significant proportion” of their portfolio to lower-risk investments. But 32% took contrary action, saying they moved “some” or “a significant proportion” into high-risk holdings.

“Instinct tells us to take cover after a big shock,” says Rupert Rucker, Schroders’ Head of Income, “and so it is not surprising to see that some investors were selling in the wake of Covid-19. But it’s noteworthy such a large group took the opposite action, and added to their risk.”

He sees this as a sign that investors are becoming increasingly “value aware”.

“We’ve got to remember that Covid-19 came after a long period of rising stock markets, and my sense is that many investors were conscious of valuations becoming high,” he says. “So, they saw the February-March correction as a window of opportunity. I think we’re seeing a large cohort of investors not only committed to stock markets, but also increasingly watchful, looking to spot moments of value.”

In the short term, the action taken by some bullish respondents is likely to have paid off, as stock markets have rallied strongly since their lows despite a continuing stream of unsettling economic data. “It may also be the case that investors are becoming used to seeing a divergence between stock market performance and economic performance,” Rupert adds.

Savings are a greater concern following Covid-19…

The outlook for their savings and investments has become a bigger concern for investors since the pandemic.

Before the outbreak of coronavirus, 19% of Hong Kong investors thought about their investments at least weekly. Following Covid-19 this proportion has leaped to 34%. In total, 76% of Hong Kong investors now think about their portfolios at least on a monthly basis.


…but investors are broadly optimistic about the pandemic’s negative economic impact

A majority of Hong Kong investors reckon the economic effects of coronavirus will pass within two years, reflecting an optimism that’s not in line with many regions’ own official forecasts.

Again, investors’ comparatively optimistic response could be due to their experience in the past decade of healthy stock market returns – even while the world economy faced significant challenges.

Investment income: savers’ hopes are “unrealistic”

One area where investors took a more negative view was that of the investment income they would expect to receive from their portfolios over the next 12 months.

In 2019, Hong Kong investors expected their holdings to deliver a 8.8% income.

Following the Covid-19 crisis, this has dropped in 2020 to 8.1%.

It is still highly unrealistic, however. Most investments’ “natural yield” – such as the dividends paid to shareholders, or interest paid to bondholders – is far lower than 8.1%. And one of the effects of the Covid-19 crisis has been to push these yields even lower.

Many companies have cut or cancelled dividend payments in the aftermath of the outbreak. Bond yields have also fallen, in part due to central banks such as the Federal Reserve cutting interest rates and committing to keeping them at low levels. This backdrop of ultra-low interest rates is another possible explanation for investors’ readiness to remain invested in stock markets, or increase their exposure to higher-risk holdings.

The role of cash after Covid-19 – who’s holding it, and for what?

While some Hong Kong investors said they were moving a proportion of their portfolio into lower-risk investments, others went further, and said they had switched to cash.

When questioned about their actions following the onset of the pandemic, 22% of Hong Kong respondents said they moved “a significant proportion” of their portfolio into cash.

This raises interesting questions about investors’ future intentions, Rupert Rucker suggests.

“The survey gives an intriguing snapshot into investors’ attitude to cash. Clearly there are investors who view cash as a safe haven in times of crisis, and some respondents said they sold equities and switched into cash,” he says. “But the responses also revealed that a large proportion – more than a third – moved into higher-risk investments, and that suggests to me that some investors hold cash, and other less-volatile assets, as an ‘opportunity pot’ to spend when share prices fall to attractive levels.

“As history shows, in practice it is very difficult to spot the best time to invest. The biggest problem facing those who switched into cash is likely to be the issue of when to go back into the market.”

For more on the Schroders Global Investor Study 2020, please visit

1 MSCI WORLD fell 34% between 12 February and 23 March. Source: Refinitiv

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