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2020 Q2 Asia Pacific market outlook

As oil price war and global health concerns rattled the markets, what investors would be watching in Q2? David Chao, Global Market Strategist, Asia Pacific, shared his Asia Pacific market outlook in this video.

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Invesco Asia Pacific official statement regarding Coronavirus relief

Invesco and its China JV, Invesco Great Wall (IGW), are committed to helping China with immediate healthcare relief from the COVID-19 Coronavirus outbreak and support longer term disease prevention measures. 

Since early February, Invesco Great Wall (Shenzhen Ltd) has helped China address the situation by donating RMB 1 million to the Hubei Charity Federation to provide medical supplies to hospitals in Wuhan.  It has donated an additional RMB 1 million to the Zhong Nanshan Medical Foundation of Guangdong to support work on finding a cure for the Corona virus. 

To show confidence in the market, Invesco Great Wall will be investing RMB 35 million of its firm capital into IGW-managed equity mutual funds.  IGW employees and families have also made commitments to invest no less than RMB 35 million of personal funds into IGW-managed equity mutual funds.  Invesco believes by working together, China will be able to overcome the current challenge and emerge resilient.

Invesco and Invesco Great Wall have been working closely during this time to ensure a supportive environment for employees, including encouraging those in affected cities to work from home as necessary. There are stringent emergency management strategies in place to ensure clear communications and frequent updates are available during this critical time. Top priority is given to the well-being and safety of Invesco employees and their families.
 
About Invesco Ltd.
Invesco is an independent investment management firm dedicated to delivering an investment experience that helps people get more out of life. NYSE: IVZ; www.invesco.com.
 

Market Outlook - Monthly

March 2020 (covering February 2020)

United States

  • The US equity markets reaching all-time highs before rising concerns over the spread of coronavirus triggered a sharp sell-off.  With concerns mounting over a global slowdown and the negative impact; US equities ended the month with their worst weekly decline since the Global Financial Crisis in 2008.
  • The US equities’ valuation has returned to more reasonable level following February sharp correction. The latest tax and interest rate cut may provide some short-term relief, but focus remains on impact of a pandemic scenario in US.

Europe (including UK)

  • The European and UK equities fell on fears the coronavirus could pose a serious challenge to economic growth.  The spread of the coronavirus was accelerating outside of China. It was the sudden surge of cases in Italy. Which eventually resulted in entire towns being locked down, that spooked investors and led to frenzied selling in equities. 
  • The challenging situation in Italy and concern for widespread to Pan European countries; investors are generally risk off and rotating to defensive trading at above-historical-valuation.

Asia Pacific (ex Hong Kong ex China ex Japan)

  • Asian equities were generally weak in February as the spread of the coronavirus outside China accelerated, raising concerns over the impact on global economic growth.  A sharp increase in new cases of coronavirus in South Korea saw its currency and equity market weaken sharply.
  • It remains to be seen how COVID-19 impact on individual Asia Pacific ex Japan economies.  The latest rate cut in US should be generally favorable for EM and Asia currencies.

Hong Kong and Mainland China (H-shares)

  • Chinese and Hong Kong equities continued with the decline in February.  The COVID-19 outbreak remained in focus and is spreading beyond China and caused market concern over its disruptions to economic growth and corporate earnings. Hong Kong underperformed the Chinese market but outperformed the rest region.
  • The China and Hong Kong markets are ahead of other regions to contain widespread.  We believe from SARS experience, we can expect a V-shaped recovery but global situation remains uncertain.

Japan

  • Japan’s equity market also weakened, with concerns that the coronavirus outbreak will tip the economy into recession. Analysts had been expecting 4Q GDP growth to be weak, reflecting a rise in sales tax, the fallout from a powerful typhoon and the US-China trade war.
  • Market concerns on continuity of 2020 summer Olympics and economic impact if postponed or cancelled.  Yen has been resilient due to flight to safety.

Fixed Income

  • As the Coronavirus spread across more countries, concerns about its impact on global economic growth intensified.  Against this backdrop, core government bonds were the main beneficiaries.  The exception to the positive returns within the market was Italy. 
  • Weak US dollar and unprecedently low interest rates globally. Central banks worldwide are also easing to procure growth.  In such environment, we favors corporates over government, with investors continuing to search for yields and better carry.

Emerging Markets

  • In a volatile month for emerging equity markets, initial gains were soon wiped out by concerns of a global growth slowdown as fears grew that the coronavirus could be more widespread than first thought.  While all regions in emerging equity markets fell in value, losses in Asia were less pronounced due to the outperformance of China.
  • We believe that valuations in emerging equity markets are relatively attractive, trading at a discount to their peers in the developed world, with selective long-term stock picking opportunities remaining.


From the perspective of Hong Kong pension investing. All data are sourced from Invesco dated March 19, 2020, unless otherwise stated.

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