See through the cloud of fears


The market sees low clarity under unprecedented challenges. The public health crisis first disrupted the supply chain and quarantined workers in China. As it turned global, lockdown and other virus containment measures slowed logistics flow and crippled consumption. The ripple effects were across almost all industries resulting in a twin supply and demand shock. What should investors monitor on top of this?


Watch over: Recovery pace and Consumption

At the time of writing, the good news is we see the first batch of virus-hit countries, including China, walking out of the crisis and putting things back on track.

The gradual resumption of regular activities – whether they are social or business activities – presents this risk of how much longer the world will need to fully regain its output level before the virus hit. With aggressive containment, China now displays a “first in, first out” case, implying a potential of the country to be the first to begin the recovery stage. Meanwhile, Europe and the U.S. are still subject to lockdown with some parts where lockdown being extended to at least mid-May.

Another risk factor is the actual magnitude of consumption pickup when the dust settles. Investors should be mindful of whether shoppers will indeed return to spending in the second half of 2020 as anticipated, given a rising jobless rate. The unemployment claims top 22 million, or 13% of the national workforce, since the start of the COVID-19 related shutdowns around mid-March.1 From a macro level, it is practical to take both aspects into account to better understand this year’s earnings outlook.

For the time being, the global investing community will continue to feel the pinch from the pandemic because actual economic impacts are to gradually surface in the coming quarters, thus deepening market volatility.


Concerted easing and what it implies?

Now, the situation is dynamic and unprecedented. We see governmental bodies signal a willingness to support economies and do “whatever it takes”. The expansion of credit facilities to $2.3 trillion in the U.S. is one example. The massive package is the first in history in its approach to purchasing corporate bonds, even those of non-investment grade ratings. In our view, the action came swiftly and is believed to somewhat cushion obstacles ahead.

While their effects remain to be seen, we take a cautious view in terms of the effectiveness of measures and the combined effects they would form to restore market confidence. Over the longer term, investors should assess the effectiveness of additional monetary measures and aggressive fiscal stimulus packages and if the strength of the economy is restored as a result.

Each country’s virus containment efforts will be a rough projection of recovery trajectory for the near term – whether the policies are effective in place; for countries that have almost tamed the spread, whether they are subject to the risk of a second wave of contagion.

We continue to believe that investors should not give in to short-term market noises while constant observation and deep research will always be essential to find meaningful opportunities.


  1. Source: Bloomberg, U.S. Department of Labour, 16 April 2020


The views expressed are the views of Value Partners Hong Kong Limited only and are subject to change based on market and other conditions. The information provided does not constitute investment advice and it should not be relied on as such. All material has been obtained from sources believed to be reliable as of the date of presentation, but its accuracy is not guaranteed. This material contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

This commentary has not been reviewed by the Securities and Futures Commission of Hong Kong. Issuer: Value Partners Hong Kong Limited