Bearing Asset Management "Asian Stock Markets to Show Fastest Growth Once COVID-19 Ends"

Negative Impact on China and Asian Economies Due to COVID-19
China and Asian Markets Have the Highest Long-Term Growth Potential
Rapid Recovery Expected if National Currency and Fiscal Policies Are Supported

[Asia Economy Reporter Minji Lee] Although Asian stock markets have been directly hit by the fear of the novel coronavirus infection (COVID-19), opinions suggest that this impact will not be prolonged. Furthermore, it is expected that the economies most severely affected in the short term will recover the strongest.

Kim Do, Head of Global Markets and Greater China Investments at Baering. Photo by Baering Asset Management

On the 4th, Kim Do, Head of Investment at Baring Asset Management, said, “Due to the aftermath of COVID-19, China’s first-quarter GDP is expected to drop sharply compared to the previous quarter,” adding, “Countries connected with China after its economy was paralyzed?such as Vietnam, Thailand, Japan, Taiwan, South Korea, and Hong Kong?are experiencing significant short-term impacts.”

In fact, China, Asia, and emerging markets have recorded relatively superior performance in foreign exchange and stock markets compared to the US and other developed markets until now, but have shown poor performance since the COVID-19 outbreak. Among Asian and emerging markets, currencies of countries with particularly high debt ratios have depreciated significantly against the US dollar.

However, if COVID-19 subsides around April to May, China and Asia, which have been heavily affected, are expected to show strong recovery. Kim Do stated, “Many governments in these countries have already initiated monetary and fiscal policies,” explaining, “For example, Hong Kong announced large-scale fiscal policies to stimulate consumption, and various policies will be implemented once the crisis ends.”

He continued, “The Asian market is well-positioned for long-term growth, supported by various structural and demographic trends,” emphasizing, “If growth rates in China and Asia rebound after the second quarter, the relative performance of the region’s economies and companies could surpass that of the US.”

The outlook for the US financial market in the second half of this year is uncertain due to uncertainties surrounding the presidential election. Accordingly, investors are expected to seek growth opportunities in the Asian region rather than the US.

Reflecting this situation, Baring Asset Management recently adjusted its weighting in Asian stocks. The Hong Kong and China investment teams have reduced the proportion of consumer goods, which was judged to be overvalued since August last year, and additionally included the digital healthcare sector.

Kim Do explained, “We maintained a growth-seeking investment strategy based on the judgment that the current market may remain in a short-term correction,” adding, “We also increased the investment proportion in undervalued Japanese bonds to hedge against volatility.”

This content was produced with the assistance of AI translation services.