High net worth investors in Asia continue to be rational with their investment decisions in spite of the Wuhan coronavirus outbreak, according to Grizelda Lee, Indosuez Wealth Management’s Hong Kong-based head of discretionary portfolio management for Asia.
“I don’t think the reaction has been very grave. Clients seem to be a little bit more at ease now,” she told FSA recently.
“I think it is a function of us giving regular updates to clients in terms of the market outlook and the economic impact we should anticipate from the coronavirus. I also get regular updates from the fund managers [we invest in], so there is really no lag in the information that we are getting.”
Lee added that a more positive macroeconomic backdrop this year has helped with investor sentiment, given that the headwinds in 2019 have dissipated.
“The macro picture is rosier. You have the first phase of the US -China trade deal signed, so the trade war noise is going to be a bit lower at least for the first six months this year.
“There is also not much of a recession talk now for the US. Central banks globally have also continued to provide liquidity in the market. That is why the market has not been as beaten down as we know it.”
Various global indices since the start of February
According to Lee, clients have continued to invest and maintained to have a long-term view.
“Although clients are already expecting modest returns this year compared with what we had in 2019, they are still quite happy to look at the longer-term. With that lowered expectations, it is easier to stomach a bit of volatility caused by the coronavirus,” she said.
This year, Lee expects “mid-single to high-single digit returns” for global equities.
Fund products both in and outside of China have also continued to see inflows this month. For example, fundraising activity for newly launched products this month in the mainland continues to be strong, while a number of China-focused ETFs listed in Hong Kong had huge inflows since the start of the year.
Coronavirus impact
That said, Lee acknowledged that the Chinese and a number of Asian economies will be affected by the coronavirus in the short-term.
“We do expect GDP in China to be slashed by about 0.5-1% if the coronavirus were to peak in March. But China can potentially catch up in the next three quarters,” she said.
“Other Asian economies, such as Thailand and Singapore, will be a little bit more hit, as a lot of their GDP come from Chinese tourists.”
While the overall GDP is expected to slow down, Lee believes that not all sectors will be affected.
“Companies coming from the offline retail, food and beverage, tourism and travel are most likely to be affected,” she said.
On the flipside, Lee believes that e-commerce, healthcare, video gaming and online education are most likely to be stable.
Lee claims that the firm’s Asian-focused mandate is positioned to be on those sectors.
“At the start of the year, we were luckily well-positioned in these sectors given their secular growth stories, so we didn’t have to change the portfolio very much when the coronavirus hit,” she said.
