What virus? Asian investors still think markets will end higher in 2020

Keep calm and carry on is the message from Asian financial experts even as the region’s emerging markets take a battering from the spread of the deadly coronavirus.
Note: Inputs from Bloomberg survey was conducted from Feb. 14 to Feb. 21.
The survey participants were:

• Asset Management One Co.
• AxiCorp
• Bank of Singapore Ltd.
• BNP Paribas Asset Management
• Citi Private Bank
• Deutsche Bank Wealth Management
• Fujitomi Co.
• Kasikornbank Pcl
• Loomis, Sayles & Co.
• Malayan Banking Bhd.
• Mitsubishi UFJ Kokusai Asset Management Co.
• Mizuho Research Institute Ltd.
• Monex Inc.
• Office Fukaya, Research & Consulting
• Siam Commercial Bank Pcl
• Scandinavian Enskilda Banken AB
• UBS Asset Management
• UOB Private Bank

Stocks, bonds and currencies in the region are all tipped to rise this year as central bank easing and government stimulus measures outweigh the impact of the epidemic on Asian economies, according to a survey of 18 traders, strategists and fund managers undertaken this month. The favorite asset to buy among currencies is the Indonesian rupiah, while investors looking to purchase bonds or stocks should both choose China, the survey found.

The rupiah was the most-favoured currency amid speculation investors will search for higher yields as global central banks ease policy to counter the impact of the virus. Chinese bonds and stocks were both ranked first in their categories after Beijing announced monetary easing and fiscal support measures.

“The current coronavirus scare will probably stabilize around the second quarter, and that will lead to a recovery in economic activity,” said Tetsuya Yamaguchi, chief technical analyst at Fujitomi Co. in Tokyo. “As emerging-market central banks could either cut or stay on hold, interest rates will probably remain low globally. That makes a good case for a rebound if you look ahead for the year, especially after the kind of sell-offs we’ve seen that made assets quite cheap.”

“The current coronavirus scare will probably stabilize around the second quarter, and that will lead to a recovery in economic activity,” said Tetsuya Yamaguchi, chief technical analyst at Fujitomi Co. in Tokyo. “As emerging-market central banks could either cut or stay on hold, interest rates will probably remain low globally. That makes a good case for a rebound if you look ahead for the year, especially after the kind of sell-offs we’ve seen that made assets quite cheap.”

The impact of the coronavirus on China’s economy will be relatively short-lived, even though it is currently roiling financial markets, the survey showed. All of the respondents agreed that it would slow growth in the first quarter, but less than 10% envisaged any impact by the last three months of the year.

The respondents were also asked about the outlook for monetary policy, economic growth and inflation. They were unanimous in predicting China’s central bank will cut interest rates this year, while only about 30% saw a similar step being taken in Taiwan. The interviewees were also unanimous in the view that China’s economy will contract this year, while as a group they saw stable to lower inflationary pressures.