Dear Investors,
Market Review
In March 2020, the MSCI Far East ex-Japan Index slid 10.77%, while the MSCI World Index plunged by 13.47%.
Wall Street was hammered anew over accelerating number of COVID-19 cases in the US and collapse of oil price after OPEC+ failed to reach an agreement to extend production cut. The Dow Jones Industrial Average Index (DJIA) was down 13.74% over the month, while the S&P 500 index fell 12.51% and the Nasdaq Composite Index slid 10.12%. The DJIA had actually plunged to as low as 18,591 on 23 March before rebounding 21% over the subsequent 3 days, helped by US Government moves to introduce a US$2 trillion stimulus package to rescue the economy. The US Dollar index was up by 0.93% in March.
In the Eurozone, the Stoxx Europe 600 Index was down by 14.80% as investors weighed concerns over the spread of the coronavirus in Europe and across the world. During the month, Fitch Ratings downgraded the credit rating outlook of the Italian banking sector to negative from stable, citing stress from the virus.
The China A-shares were down 6.44%, while the Hang Seng Index closed 9.67% lower m.o.m. China outperformed the world, mainly driven by the country being ahead of the epidemic control curve and the start of gradual resumption in economic activity there. While faring relatively better than other markets, the Hang Seng Index recorded its biggest quarterly decline since 3Q15, brought about by the COVID-19 pandemic.
The South Korean market tumbled 11.69% on COVID-19 fears, but saw moderate recovery as global policymakers and governments started to ease monetary policies and take fiscal measures to pour liquidity into their economies. Korean government announced its KRW12 trillion fiscal stimulus package and cut its base rate by 50 bps.
Meanwhile in Taiwan, the index declined 14.03%. The tech sector remained under pressure from worsening end demand outlook for smartphones from the COVID-19 outbreak. The iPhone supply chain suffered from supply constraints along with a potential demand shortfall.
Singapore’s STI was down 17.60% in March. All sectors declined in March. Tech, Maritime and Telcos were affected to a lesser degree, while REITs, Consumer Goods and Healthcare led the underperformers.
Malaysia’s KLCI slid 8.89%. The government announced a Movement Control Order (MCO) to prohibit non-essential travel to slow the spread of the Covid 19 outbreak. The government also announced a RM250bil stimulus package to mitigate COVID-19 impact. Of this, almost RM128 bil will be channeled to preserve the people’s welfare, RM100 bil to support businesses, including SMEs, and RM2 bil to strengthen the economy.
In Thailand, the SET index tumbled 16.01%. The index closed down sharply on concern of escalation of localised of COVID-19 infection in the country. Thailand will be hard hit in this pandemic as tourism is a big part of its economy.
The Jakarta Composite Index (‘JCI’) was down by 16.76%, while Indonesia Rupiah depreciated 12.01% m.o.m. Indonesia suspended its visa exemption policy for all countries for one month and expanded entry restrictions for people with a history of travel to countries hardest hit by the COVID-19.
In the Philippines, the PSEi tumbled 21.61%, making March 2020 one of the worst months since 1990. For the quarter to March, the quarterly return of -31.91% is the worst since the Asian financial crisis. During the month, index heavyweights were the most beaten down while only telcos managed to eke out slight gains.
Vietnam’s VN-Index retreated 24.90% in March. Owing to the dampened investors’ sentiment and fear over the impact of COVID-19 on both domestic and global economy, nearly all stocks were hit hard by aggressive selling, led by blue-chips including banks and retail stocks.
Crude oil price (WTI) tumbled 54.24% to USD20.48 per barrel in March, while Brent crude plunged 54.99% to USD22.74 per barrel. Oil recorded its worst monthly decline on concern about sharp falls in global demand resulting from the pandemic, and exacerbated by over-supply in the world markets following failure of OPEC and Russia to reach a deal on extension of production cut beyond March 2020. Crude palm oil (CPO) prices gained 8.19% to RM2,550/MT in March.
The COVID-19 outbreak in the western countries has yet to show sign of slowing down. However, the global stock markets have rebounded strongly in the later part of the month, helped by monetary and fiscal policy measures to inject substantial liquidity into the financial system as well as providing financial assistance to help businesses and workers tie over a period of severe business and employment disruptions. We believe that given the actions taken by the governments in controlling the spread of the disease and in helping businesses mitigate the financial impact will help the markets to bounce back fairly quickly when it is clear that the pandemic has been brought under control. However, one can expect that this can be more prolong than was the case with SARS, given the uncertain nature of this novel corona virus and the fact that different country is going through a different epidemic control cycle.
While it is as yet unclear how long it would take to put the pandemic under control and the economic impact is expected to be felt for some time, the market uncertainties and the attendant volatilities would provide opportunities to increase exposure in value stocks that are sold down well below their intrinsic value. Hence, we will be watchful for valuations that have become compelling, especially for quality stocks that have strong foreseeable earnings growth with low gearing. At the same time, as we never fully invest at all times, we may seek to trim our equity exposure on stocks which have rallied beyond their fundamentals.
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