SMU Classification: Restricted SMU Classification: Restricted - - PowerPoint PPT Presentation

SMU Classification: Restricted

SMU Classification: Restricted

Challenges of investing in Asia during the COVID-19 Crisis

Prof Dave Fernandez - Director, Sim Kee Boon Institute for Financial Economics July 2, 2020

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• Established 2008 in honor of SIM Kee Boon, former head of Singapore’s

civil service and a leading member of the country’s founding generation

• Founding Director: SMU & University of Pennsylvania Prof Bobby Mariano
• Mission: To conduct applied economic and financial research & training

that is driven by industry & societal needs

• Emerging Research Areas
• Financial Inclusion & Education
• Sustainable Finance
• Financial Technology
• Data & Governance
• Monitor & take views on market & macro trends

3

About the Institute

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4

Investing in Asia during COVID-19

Wild 1H ride

• S&P 500
• 34% drop
• trough 23 Mar
• 39% rise
• YTD -4.0%
• US dollar
• 8.3% rise
• Peak 20 Mar
• YTD 1.1%
• VIX peak 16 Mar

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5

Investing in Asia during COVID-19

• COVID-19
• Policy response
• Economic fallout & outlook
• Asset price fallout & outlook

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6

COVID-19

Selected COVID-19 dates and events

• 31 Dec 2019 – WHO’s COVID-19 timeline starts
• 17 Feb – Patient #31 tests positive
• Start of first significant (detected) spread outside of China
• 29 Feb peak at 909 daily new infections
• 7 Mar – NY emergency
• mid-April – US curve flattens

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7

COVID-19

COVID-19 experts and market view on experts

• Imperial College report: 510,000 deaths in GB and 2.2 million in the US
• 14-15 Mar – shared with PM, UK then US announce on Monday 16 Mar
• “You don't make the

timeline, the virus makes the timeline’” -- Dr. Fauci

• “People in this country

have had enough of experts.” – Michael Gove

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8

Investing in Asia during COVID-19

• COVID-19
• Policy response
• Economic fallout & outlook
• Asset price fallout & outlook

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9

Policy Response

US goes big

• 15 Mar – start of a series of FOMC policy announcements
• 19 Mar – USD swap arrangements, adding to standing w/BOJ
• Temporary w/RBA, BOK, RBNZ, MAS
• Fiscal quick (unlike GFC)
• 6 Mar Senate hearings
• 19 Mar CARES Act passed

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10

Policy Response

Asia Pacific Responses Vary RBA and RBNZ bringing other tools into scope

• 3 Mar – RBA cuts cash rate to 0.50% (-25bp)
• 16 Mar – RBNZ cuts OCR to 0.25% (-75bp)
• 19 Mar – RBA cuts again (to 0.25%) & targets 3y govt bond @0.25%
• 7 May – RBNZ sends letter to banks re: negative OCR

EM Asia CB purchases of government bonds

• 24 Mar – BSP
• 25 Mar – BOK
• 31 Mar – President Jokowi issues Perpu 1/2020

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11

Investing in Asia during COVID-19

• COVID-19
• Policy response
• Economic fallout & outlook
• Asset price fallout & outlook

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12

Economic fallout & outlook

Downward GDP forecast revisions, now some upward revisions

• Spillovers from China, then lockdown impact
• June upward revisions

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13

Economic fallout & outlook

Non-traditional indicators and indices

• ld indicators
• PMI’s, orders, claims

new indicators

• Google
• Apple
• OpenTable
• Lockdown restriction

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14

Investing in Asia during COVID-19

• COVID-19
• Policy response
• Economic fallout & outlook
• Asset price fallout & outlook

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15

Asset prices fallout & outlook

Equity markets

• US S&P outperforms
• Tech
• Communications
• Health care
• Australia (ASX)
• COVID-19 control
• Policy response
• China & resources

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16

Asset prices fallout & outlook

Currencies

• USD
• unch
• EM Asia
• weaker
• Variety
• Peso strong
• Won weak
• Rupiah volatile

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Asset prices fallout & outlook

Local-currency fixed income

• Indonesia GBs
• IDR volatile vs ADXY
• BI not in a rush to cut
• Foreigner positioning light
• Yields have lagged BR & RU

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18

Investing in Asia during COVID-19

For 2H

• COVID-19 still ”makes the timeline”
• US politics > trade war

Feel free to follow up: david.g.fernandez1@gmail.com +65 9277-1015

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Institute Staff, Fellows & Faculty

Staff Dave Fernandez – Director Priscilla Cheng – Deputy Director Elaine Goh – Manager Lisa Lee – Manager Eugene Goh – Asian Financial Leaders Program Chandra Gunawan – Citi-Financial Literacy Program Research Fellows Zichun Huang Thomas Lam Marc Rakotomalala Wanyi Yang Contact skbi_enquiries@smu.edu.sg http://skbi.smu.edu.sg 50 Stamford Road, Singapore 178899 Affiliated SMU Faculty Ekkehart Boehmer – Keppel Professor of Finance Dave Fernandez – Professor of Finance (Practice) Sterling Huang – Assistant Professor of Accounting Weikai (Frank) Li – Assistant Professor of Finance Hao Liang – Assistant Professor of Finance & DBS Sustainability Fellow Roger Loh – Associate Professor of Finance Simon Schillebeeckx – Assistant Professor of Finance Jun Yu – Lee Kong Chian Professor of Economics and Finance Yang (Gloria) Yu – Assistant Professor of Finance Visiting Faculty Hyun-Soo Choi – KAIST, Korea Marinela Finta – University of Otago, New Zealand Alexander Galetovic – Universidad Adolfo Ibáñez, Chile Wolfgang Härdle – Humboldt University, Germany

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Master of Central Banking

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