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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 SMU Classification: Restricted


  1. SMU Classification: Restricted

  2. 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

  3. SMU Classification: Restricted About the Institute • 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

  4. SMU Classification: Restricted 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 4

  5. SMU Classification: Restricted Investing in Asia during COVID-19 • COVID-19 • Policy response • Economic fallout & outlook • Asset price fallout & outlook 5

  6. SMU Classification: Restricted 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 6

  7. SMU Classification: Restricted 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 7

  8. SMU Classification: Restricted Investing in Asia during COVID-19 • COVID-19 • Policy response • Economic fallout & outlook • Asset price fallout & outlook 8

  9. SMU Classification: Restricted 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 9

  10. SMU Classification: Restricted 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 10

  11. SMU Classification: Restricted Investing in Asia during COVID-19 • COVID-19 • Policy response • Economic fallout & outlook • Asset price fallout & outlook 11

  12. SMU Classification: Restricted Economic fallout & outlook Downward GDP forecast revisions, now some upward revisions • Spillovers from China, then lockdown impact • June upward revisions 12

  13. SMU Classification: Restricted Economic fallout & outlook Non-traditional indicators and indices old indicators • PMI’s, orders, claims new indicators • Google • Apple • OpenTable • Lockdown restriction 13

  14. SMU Classification: Restricted Investing in Asia during COVID-19 • COVID-19 • Policy response • Economic fallout & outlook • Asset price fallout & outlook 14

  15. SMU Classification: Restricted Asset prices fallout & outlook Equity markets • US S&P outperforms • Tech • Communications • Health care • Australia (ASX) • COVID-19 control • Policy response • China & resources 15

  16. SMU Classification: Restricted Asset prices fallout & outlook Currencies • USD • unch • EM Asia • weaker • Variety • Peso strong • Won weak • Rupiah volatile 16

  17. SMU Classification: Restricted 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 17

  18. SMU Classification: Restricted 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 18

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

  20. Q & A SESSION Please use the survey link in the chat box or the QR code to suggest topics of interest for future ASB-SEACEN Webinars.

  21. Master of Central Banking To learn more visit https://asb.edu.my/academic- program/master-of-central-banking

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