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Four CIOs, PMs assess the impact of virus-led 'lockdowns'

Many countries have declared lockdowns to limit the spread of Covid-19. Four asset managers tell us which sectors stand to benefit or lose the most.

The Covid-19 outbreak has put the brakes on growth, with many countries going on lockdown to limit its spread.

The number of confirmed cases in the US recently surpassed China, adding fears of a global recession.

In this Citywire Asia gallery, four asset managers weigh in on the economic impact of lockdowns, and the sectors that stand to benefit or lose the most. 

The Covid-19 outbreak has put the brakes on growth, with many countries going on lockdown to limit its spread.

The number of confirmed cases in the US recently surpassed China, adding fears of a global recession.

In this Citywire Asia gallery, four asset managers weigh in on the economic impact of lockdowns, and the sectors that stand to benefit or lose the most. 

Sunny Ng, PineBridge Investments

Portfolio manager, global multi-asset

Lockdowns imply a complete standstill in economic activity. Businesses, especially small and medium sized enterprises, struggle with cash flows and cost management as a result of being shut and general public staying home.

Many businesses are faced with tough decisions for cutting costs, with several resorting to cutting employees.

Liquidity in credit markets are dried up due to a major concern over the potential rise in bankruptcies. Markets are likely to remain jittery until a government response is sufficient enough to allay those concerns. 

The services sector will struggle, as seen in countries where service-oriented businesses are shut. Anecdotally, delivery services cannot keep up with demand as more and more people stay home.

The degree of the lockdown will determine how bad businesses are affected.

Ken Wong, Eastspring Investments

Client portfolio manager, equities

Lockdowns generally do not provide a lot of benefits for the greater economy. Looking at China, however, e-commerce related companies like online vendors and online gaming proved to be resilient during the COVID-19 outbreak.

Online meeting platforms and online educational related companies have also seen strong gains in their share prices.

Given that stocks are now trading well below their intrinsic value, there are plenty of good stock picking opportunities in various sectors.

The market volatility and high correlations between Asian equity and fixed income markets should benefit medium- to long-term investors. They have a more diverse exposure to lower correlated sectors, such as Asian real estate assets.

This would help investors weather the capital market’s daily volatility, while maintaining a long-term holding in one of the more exciting long-term growth prospects in Asia.

Pascal Blanqué, Amundi

Group chief investment officer

This is a time when it is too late to sell and too early to buy. Selling now could damage the ability of investors to reach their long-term objectives, especially in these volatile conditions.

Instead, they should be ever more tolerant of the volatility and keep away from pessimism, while the market looks for a real catalyst to trigger the bottom, such as the discovery of a treatment.

The energy sector is to be the hardest hit within the US HY issuers, with the falling oil prices. Equity markets in bear markets will be short-lived, as compared to the scene back in 2008 to 2009.

We keep a constructive view on the final part of the year, expecting a strong recovery in market prices, along with an improvement in economic conditions. And remain selective in risk assets such as equities and credit.

Monitoring liquidity is critical at the moment and a key priority for us.

Alex Tedder, Schroders

Head and CIO of global and US equities

While Covid-19 has had a material effect on economic fundamentals – alongside the humanitarian impact – it has been a catalyst for a rapid market re-set following an unprecedented bull market too. 

The lockdowns have created a risk of stress for mulitple sectors. Market moves reflect fears of uncertainity and deterioration in the economic environment and growth expectations.

Monetary and fiscal stimulus measures have thus been brought to bear to bolster economic activity.

On an encouraging note, the number of active cases of Covid-19 in China has fallen materially. 

While the risk of new outbreaks remains, it is nonetheless a positive development and the experience of China will be closely watched.