Terry Tang, Investment Advisor
June 30, 2020
The COVID-19 pandemic has put the world economy to a pause. Early this year, governments around the world rushed to close down businesses and impose strict social distancing measures in order to “flatten the curve”. After more than three months of closures and shutdowns, businesses are slowly reopening up. But the threat of a second wave is imminent, and we are not completely out of the woods yet. However, opportunities still remain for investors. Despite the v-shape rebound we have seen since March, there are still bargains to be made in the stock markets.
stock market v-bound
The stock markets have recovered quite remarkably. The S&P 500 rose approximately 36% and TSX gained 37% from the bottom in March. Despite the good news, the economy has yet to recover. Investors are puzzled by the fact that the stock markets are not in sync with the economy, and they don’t have to. The stock markets have always been a leading indicator and it always will be.
Fed’s massive stimulus package, the promising development of vaccines, and any positive signs of economic rebound are enough to drive the global markets higher. Nevertheless, it is important to note that the rebound is mostly fueled by big techs, while many sectors are still in the negative territory for the year. As I warned in March, if investors sold their holdings they would miss the rebound. And it has proven to be true for investors who sold during the panic.
the future of hong kong
Despite these challenging times, the economic war between the U.S. and China continues. Just recently, the Trump administration revoked Hong Kong’s special trade status, and the city can no longer enjoy preferential trade relations it once had with the largest economy in the world. The decision came after the Chinese government set to impose a new and controversial national security law that could potentially destroy the foundation of “one country two system”. After losing the special status, Hong Kong can no longer operate as a separate customs territory to mainland China. Foreign investments, trades, and the value of HKD could be adversely affected. Foreign businesses are already considering relocating to other financial hubs such as Singapore and Tokyo, and it could potentially mean the end of Hong Kong as a world financial centre.
the trend of telecommuting
If COVID-19 has changed anything it is definitely the trajectory of telecommuting. Ever since the outbreak, businesses and employees have been embracing work from home. Employers are starting to change their attitudes on what can get done with remote work and how productive it can be. Telecommuting will very likely outlive the pandemic. This may translate higher vacancy rates for commercial properties but cost-savings for corporations going forward.