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Investing During and Post-COVID-19

The COVID-19 pandemic is going down in history as an episode that is massively redefining society, global politics and financial markets. The resultant shifts in corporate and consumer behaviour will redefine new winners and losers across different sectors and geographies.

On 27 May 2020, over 350 members attended NUSS Business Connect’s maiden webinar – Investing During and Post COVID-19. It was an insightful session for the audience who tuned in to listen to market experts share their thoughts on recent economic developments, market trends and how investors can seize new opportunities arising from this crisis.

Moderator and NUSS Business Connect member, Mr Leslie Chua, opened the session with a brief introduction of the Business Connect interest group, and how the robust group has served as a platform where members can establish new business connections and organised a number of networking sessions, workshops and overseas business mission trips. Executive Director, Investment Strategy at OCBC Bank’s Wealth Management Unit Mr Vasu Menon began his presentation with an assessment of the extensive economic damage caused by the pandemic. He shared the IMF’s projection that the world economy is expected to shrink by 3 percent this year — compared to the 0.1 percent dip in world GDP during the global financial crisis in 2008/2009, the IMF’s forecast reflects the deep severity of the impact arising from COVID-19. More than 36 million Americans have lost their jobs in the past few months – a figure equivalent to the number of jobs created in the United States over the past 10 to 11 years, which were effectively wiped out in a few months this year.

Besides the United States, China’s economy has also contracted by 6.8 percent in the first quarter—the first time in 30 years. Despite the dismal economic data, Mr Menon noted that stock markets have rebounded sharply since hitting a low on March 23rd. He cited aggressive and unprecedented monetary and fiscal policy, improved infection figures and the fear of missing out, as some reasons for the recent market rally. He concluded with a cautious reminder that the outlook remains uncertain given the risk of a second or even third wave of infections. “Even as economies reopen, restrictions will remain in place, which may curb economic activity,” he cautioned.

Mr Menon further cautioned that economic recovery may be more gradual than the market anticipates. “Base case scenario we expect a U-shaped recovery, as governments, individuals and even businesses remain wary of a second wave and will tread cautiously until there is greater clarity,” he added.

Maybank Kim Eng’s Head of Equity Research Mr Thilan Wickramasinghe concurred with Mr Menon that some glimmer of hope is emerging as COVID-19 cases had been trending down to a manageable level in more countries. He explained that while many companies reported better than expected financials for the first quarter of 2020, several sectors had witnessed huge declines in overall profitability even before lockdown started. The full or partial lockdowns in ASEAN countries had worsened overall economic activity, and negative growth is expected for this year. “Unless markets start opening up, many companies will face pressure on their profitability,” he added.

When posed a question on which ASEAN markets would likely emerge better off after the crisis, Mr Wickramasinghe responded that companies that have been diversifying their supply chains, moving out of China and into markets such as Vietnam, Indonesia and Thailand, even before the pandemic. As the lockdown around the region eases and economies begin to open up again, this trend of supply chain diversification is expected to accelerate even more. This would eventually propel and bolster the growth across Southeast Asia.

A poll was conducted prior to the start of the Webinar with most attendees responding that they are currently diversifying their current portfolio. Post the speakers’ presentations, the moderator fielded questions regarding other potential asset classes and on interest rates. Both speakers gave positive views on investment in gold but the interest rate environment will continue to be sanguine.

Missed the webinar? Catch it here

If you have a keen interest in business, finance and investments, find out more about NUSS Business Connect and how to get involved by emailing Fathiah at fathiah@nuss.org.sg.

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