In focus

Podcast: Lessons from Asia - The fight against Covid-19 and investing in the region


Find out how you can capture income & growth opportunities in Asia.  

Exiting the lockdown and the type of economic rebound we can expect

There are lessons we can take away from the Asia experience of exiting the lockdown. Data out of North Asia, most notably China and South Korea, has shown an encouraging rebound in economic activity. However, easing measures have also resulted in small clusters of new outbreaks.  

This suggests the road to recovery will be bumpy, and without a medical breakthrough subdued economic activity is the only way to contain the virus. With this in mind, a V-shaped recovery is unlikely and we are not pinning much hope on a vaccine anytime soon.

Instead, we're focused on the future landscape for investing in this new stage of the Covid-19 crisis; the opportunities and risks as countries exit lockdown. Further out, we are looking at how the pandemic has accelerated certain investment trends that we can capitalise on.  

Read on: The coronavirus impact on markets and the economy

Where might the best investment opportunities be in Asia? 

High income-generating assets tend to do well in a low interest rate for longer environment, and in Asia, we see selective opportunites in equities and bonds. 

In the equity space, REITs look interesting, particularly industrial REITs which house data centres and machines that are less dependent on human footfall. Industrial REITs have also benefitted from the move towards digitalisation which has accelerated due to the ongoing pandemic. 

On credit, spreads have widened considerably since the start of the year and huge stimulus measures from policymakers have been successful at preventing widespread bankruptcies. As economies re-open we expect good quality corporates to return to profitability.

Finally, unlike in Europe and the US, corporates in Asia have not been asked to avoid paying dividends in exchange for government support. Fiscal measures in Asia tend to be more targeted, towards supporting employment and cost reduction as opposed to direct loans.

While Asian companies are likely to also cut dividends due to a drop in earnings, it is unlikely that companies with strong blanace sheets will stop paying dividends altogether.

 

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