Institutions bullish on positive fiscal policies in emerging markets expected to buffer impact of epidemic
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Xue Jiao of First Business Finance In early January 2020, a new coronavirus outbreak broke out in East Asia.
Due to concerns about the spread of the epidemic, major Asian stock indexes once fell about 6% on average, oil prices tumbled 14%, and safe-haven assets such as gold and U.S. Treasuries rose sharply.
When this “black swan incident” triggered a reaction to global market interest rates, asset allocation became 淡水桑拿网 an effective way to protect investment exposure from a significant decline when the market was under pressure.
Hu Yifan, investment director and chief China economist at UBS Wealth Management Asia Pacific, told First Financial News that despite the decline in the market due to the new crown pneumonia epidemic, UBS is still replacing emerging market stocks.
Hu Yifan said: “First of all, we expect that the growth differences between emerging markets and developed markets will increasingly benefit the former.
Initially, emerging markets are estimated to be lower than developed markets.
Finally, emerging markets will benefit from many promising long-term trends over the next 10 years.
At the same time, the continued loose monetary environment around the world is also expected to support rising asset prices and economic growth. Some economies also have more and more 武汉夜网论坛 room for fiscal expenditures to buffer the impact of the epidemic.
”In addition to monetary policy, fiscal policy will play an important role in some economies where financing costs are at historically low levels.
For example, in the economies of the euro area, Victoria, New Zealand, and the Philippines, the remaining space increases the budget deficit without increasing the debt rate burden.
“David Mann, the world’s chief economist at Standard Chartered Bank, wrote to First Financial Reporter.
The long-term advantage of emerging market stocks is obvious. Since January 17, the MSCI Asia (excluding Japan) stock index has increased by about 7%, and the growth rate of urban net worth has exceeded the historical average of 1.
6 times, sustainable pressure is still possible in the short term.
UBS Wealth Management predicts that due to the outbreak of a new coronavirus, the market’s expectations for gradual profit growth may be lowered by 2?
However, once the epidemic situation is brought under control and the situation starts to improve, profit expectations may be raised, thereby reducing the downward momentum.
From the perspective of the sector, the profits of the online commerce, telecommunications, consumer staples and public utilities sectors should be stable for a long time, and the revenue of the healthcare industry may be boosted to a certain extent.
In addition, reducing spending on non-essential consumer goods may be a significant drag on the gaming and tourism sectors, such as tourism, hotels, and airlines.
In essence, the closure of the factory and the cancellation of orders will damage the technology supply chain to a certain extent.
Other potential industries should also face certain downside risks, but these sectors should recover with other sectors in the second half of the year.
Although the short-term internal emerging markets have been affected by the epidemic situation, in the long run, with the ranking of US stocks, the attractiveness of emerging market stocks, and the upcoming US election in the second half of the year have improved the performance of US stocks this year.
Sun Yu (Jin Qilin analyst), general manager of the research department of HSBC Qianhai Securities, said in an interview with First Financial News that by studying the relationship between the performance of US stocks and the election cycle in the past 60 years, the election year is usually one of the poorer performing US marketsYear, the average increase of the S & P 500 index is only 6%?
”First of all, during the US election, the two parties elected many key industries to express different views, such as defense, medical, finance, and infrastructure expansion, which will bring significant uncertainty and volatility to the market and affect the US stock market.which performed.
In the election year, this “tepid” performance of US stocks has significantly increased the attractiveness of emerging market stocks.
However, if U.S. stocks plunge, it will be difficult for the global market to survive, and emerging market stocks will also be implicated. When U.S. stocks are bullish–a rise of more than 20% in 2019, the proportion of funds in emerging markets will also drop significantly.
Therefore, Sun Yu believes that the increase in US stocks will advance this year, and more funds are expected to flow into emerging markets.
”Last year we did three roadshows in the United States and we found that more and more US institutional investors like to talk to us about the rotation of developed and emerging markets.
Why is there such a rotation?
From the end of 2008, the U.S. stock market has been in a bull market for more than a decade, and the U.S. stock market has risen more than 300% from its lowest point.
He said that the estimate of U.S. stocks is much higher than that of A-shares. Investors in U.S. stocks are changing when U.S. stocks will adjust or stand out. Below, emerging market stocks represented by A-shares are mostly in an estimated depression.Investment potential.
”China is a country with very complete industry support, and the industry distribution in the A-share market is also very complete. It can also enter the launch of the science and technology board, the reform of the registration system, and more and more new economic companies will choose to choose the A-share market.Go public.
“Sun Yu believes that China’s manufacturing industry is changing from a big one to a strong one, and there will be many companies with the highest market share in Asia and even the world in segmented industries.
”This is the most attractive part of the A-share market. I believe that we still have to explore around high-end manufacturing.
Active fiscal policy is beneficial to buffer the impact of the epidemic. Recently, the global economy has been impacted to some extent by the conflict between the United States and Iran and the outbreak of a new coronavirus.
In its latest report, Standard Chartered Bank said that if new unexpected shocks occur every month in the future, it will increase the possibility of a global recession and recession.
”If the economic growth of the United States and the euro area is 0 lower than predicted.
1 participant, our forecast for global economic growth in 2020 is renewed to 3 now.
181% down to 3.
If the economic growth of the United States and Europe shrinks, our forecast of global economic growth may be reduced to three.
“The report said.
Although the epidemic has a certain impact on global economic growth, other positive factors will affect it.
Standard Chartered Bank believes that the reduction and the outbreak of the Chinese government’s multiple policy measures provide a buffer for the economy. At the same time, the attenuation effect of the global dove wave of transfers since 2019 will continue to support economic growth.
Ma Dewei told the First Financial Reporter that after the dovish wave of comprehensive and comprehensive monetary policy relaxation in each year in 2019, the monetary environment has become more relaxed.
In the fourth quarter of 2019, the combined assets and liabilities of the Federal Reserve, European Integration, and Japan continued to expand, and are expected to continue to expand in 2020.
Economies with “lower inflationary pressures in the coming weeks and those that have been exposed to growth risks from the” black swan incident “caused by the new coronavirus epidemic” may have more unexpected easing policies.
Standard Chartered expects that further reductions in Thailand ‘s budget monetary policy will allow earlier markets to generally predict changes.
On the Indonesian side, the Indonesian Rupiah exchange rate is expected to remain stable, and Standard Chartered expects that Indonesia will introduce more unexpected relaxation policies in the long run.
Obviously, in addition to monetary policy, fiscal policy will also play an important role in some economies with financing costs at historically low levels.
”The euro area, Victoria, New Zealand, Philippines, India, Malaysia, Malaysia’s operating space in expanding fiscal deficits, even in the short term, will not lead to an increase in debt GDP.
“Madeway analysis said that when an economy’s interest burden exceeds GDP growth, the economy can maintain the deficit rate while reducing the difference without increasing the debt rate of the economy.
However, many economies with planned deficits higher than the difference may have to accept higher levels of debt to further support their economic growth.
Madwei believes that in order to respond to any additional fiscal stimulus from the epidemic, the deficit rate should be lower than the spread between actual financing costs and GDP growth, and the brakes are pushing the policy back to a more sustainable track.