THIS MATERIAL IS A MARKETING COMMUNICATION.
Coronavirus Exposing Value in Asia
Figures for the coronavirus outbreak in China totalled 80,754 as of 9 March 2020. According to the National Health Commission there were 3,136 reported fatalities with 59,897 recovered cases. The Chinese mainland reported 19 new cases of confirmed infections, 36 new cases of suspected infections, and 17 deaths (all in Hubei province).
In response to the virus, the Chinese government has pushed for more counter-cyclical efforts as well as the implementation of expansionary fiscal and expansionary monetary policy. Under the quarantine and back-to-work policies, President Xi highlighted the importance of implementing epidemic control measures while also resuming production in areas classified as low risk. Multiple cities have revealed policies that will help subsidise home purchases. The National Development and Reform Commission (NDRC) temporarily cut unit prices of electricity as well as natural gas. Largely, efforts to control the outbreak in Wuhan and Hubei include setting up 42 designated hospitals, 21,574 beds to treat patients, 10,317 additional beds in shelters to handle patients showing milder symptoms and 27,387 medical staff who have come in across the country to provide support. (These figures are as at 20 February 2020 and sourced from Bloomberg, the WHO and Chinese press reports).
Economic Disruption Persists
Although provinces in China have resumed business activities, the country still faces a shortage of workers in the movement of goods. Activity levels remain at 20-30% of 2019 historic levels. Provinces such as Guangdong (a hub for electronics) and Hebei (a hub for metallurgy) have resumed manufacturing activities faster than other municipalities.
Various sectors are being impacted. This includes tourism & hospitality, aviation/airlines, luxury goods, automotive sector, consumer products as well as consumer electronics & semi-conductors domestically.
The Next Few Weeks are Critical
We believe that the worst is over for China and the next month-and-a-half should see supply chains come back. Factories are at 30-40% utilisation, so the priority is to resume production gradually while controlling a further outbreak of the virus. Markets, however, are uncertain of the outlook in impacted countries; particularly Korea, Italy and Iran. The next few weeks will be key for investors to assess the economic disruption caused by the virus.
In a bear case scenario, countries other than China reporting an exponential increase of infected cases could pose a bigger threat to markets than first anticipated.
As seen in Korea, the sudden spike of cases mean we cannot easily predict which potential countries could be affected next. This uncertainty will have an impact on the world economy.
Furthermore, given quarantine restrictions are not being followed by all countries around the world, there is a risk that infections may be much harder to contain. We draw comfort in not seeing new large scale cases outside of Hubei, but are keeping watch as seen with the rise of new cases in Italy, Korea and Iran.
We still see semiconductor names as relatively resilient; Korea has resumed production in factories post the weekend disruption. Moreover, in the last couple of weeks with individuals forced to stay indoors and work from home, we’ve seen a big spike in data centre traffic with a huge increase in time spent on social media, games, online entertainment and education.
In the ASEAN region, there are three key factors on investor’s minds:
• The First: fear of the virus spreading beyond China which will disrupt Asian manufacturing supply chains.
• The Second: higher import prices or lack of supply will have an impact on net importers.
• Finally: ASEAN countries such as Thailand, Philippines and Vietnam have become reliant on Chinese and Korean tourists. Given the situation, tourism flow may remain subdued for at least the next two quarters.
Investment Strategy – We’re Still Bullish on Asia
Medium-term, we continue to remain positive on Asian markets and are confident that growth should recover after Q1, 2020. With inventory levels low globally, we may see a strong order momentum in the coming months to replenish stock.
In China, we believe things should improve considerably post Q1, 2020. We maintain our views and do not seek to change our positions. Overall, we are seeing 70% of scheduled flights down and jet fuel demand for February drop to 77% year-on-year. We believe the turning point for tourism will be when the WHO lifts its global alert on the virus, similar to SARS. Further, the vast majority of companies within our portfolio that are in online entertainment, education, food delivery and finance sectors have fairly robust digital interfaces. These companies should see a market share shift from their pure brick and mortar peers.
In India there are not many virus cases being reported, providing some level of comfort. The economic recovery may be delayed from negative sentiment globally but will still be underway nevertheless. Our medium-term view on India is still positive. With a forecast recovery in place, we’re positioning ourselves with an overweight exposure in financials, real estate, consumer discretionary and healthcare sectors. We are expecting rural demand recovery and with increased compliance post-GST, which should lead to higher growth for organised sectors.
Deep value exists in some of state-owned enterprises in the energy & utility space. Should the Modi Government pursue the much-articulated path of privatisation of these assets, meaningful upside can be realised over the next 12-18 months. The spread of the coronavirus, along with the trade war & tax cuts, may hasten the diversification of supply chains away from China to India, a positive from a medium-term perspective.
Outside Asia, global markets are sanguine on the back of improving PMIs, a function of inventory restocking demand and expanding Central Bank balance sheets. For Asian equities, as investors get confidence the coronavirus situation is not significantly deteriorating, markets should bottom.
Overall, the impact of the virus will affect performance in the short-term. To put it into perspective, a quarter of negative sentiment and growth is priced in post a 5-7% market correction, but will not have a material impact on long-term portfolio holdings.
Invest in Sector Leading Companies
Mirae Asset focuses on identifying ‘Sector Leaders’ that will benefit from competitive advantages and deliver sustainable growth over the long-term.
Disclaimer
This material is neither an offer to sell nor solicitation to buy a security to any person in any jurisdiction where such solicitation, offer, purchase or sale would be unlawful under the laws of that jurisdiction. Investment involves risk.
The information in this material is based on sources we believe to be reliable but we do not guarantee the accuracy of completeness of the information provided. This material has not been reviewed by SFC and shall only be circulated in countries where it is permitted.
This material is intended solely for your private use and shall not be reproduced or recirculated either in whole or in part, without the written permission of Mirae Asset Global Investments. This document has been prepared for presentation, illustration and discussion purposes only and is not legally binding. Whilst compiled from sources Mirae Asset Global Investments believes to be accurate, no representation, warranty, assurance or implication to the accuracy, completeness or adequacy from defect of any kind is made. The division, group, subsidiary or affiliate of Mirae Asset Global Investments which produced this document shall not be liable to the recipient or controlling shareholders of the recipient resulting from its use. The views and information discussed or referred in this report are as of the date of publication, are subject to change and may not reflect the current views of the writer(s). The views expressed represent an assessment of market conditions at a specific point in time, are to be treated as opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. In addition, the opinions expressed are those of the writer(s) and may differ from those of other Mirae Asset Global Investments’ investment professionals.
This material is neither an offer to sell nor solicitation to buy a security to any person in any jurisdiction where such solicitation, offer, purchase or sale would be unlawful under the laws of that jurisdiction.
Investment involves risk. The information in this material is based on sources we believe to be reliable but we do not guarantee the accuracy of completeness of the information provided. This material has not been reviewed by SFC and shall only be circulated in countries where it is permitted.
This material is intended solely for your private use and shall not be reproduced or recirculated either in whole or in part, without the written permission of Mirae Asset Global Investments. This document has been prepared for presentation, illustration and discussion purposes only and is not legally binding. Whilst compiled from sources Mirae Asset Global Investments believes to be accurate, no representation, warranty, assurance or implication to the accuracy, completeness or adequacy from defect of any kind is made. The division, group, subsidiary or affiliate of Mirae Asset Global Investments which produced this document shall not be liable to the recipient or controlling shareholders of the recipient resulting from its use. The views and information discussed or referred in this report are as of the date of publication, are subject to change and may not reflect the current views of the writer(s). The views expressed represent an assessment of market conditions at a specific point in time, are to be treated as opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. In addition, the opinions expressed are those of the writer(s) and may differ from those of other Mirae Asset Global Investments’ investment professionals.
The provision of this document shall not be deemed as constituting any offer, acceptance, or promise of any further contract or amendment to any contract which may exist between the parties. It should not be distributed to any other party except with the written consent of Mirae Asset Global Investments. Nothing herein contained shall be construed as granting the recipient whether directly or indirectly or by implication, any license or right, under any copy right or intellectual property rights to use the information herein. This document may include reference data from third-party sources and Mirae Asset Global Investments has not conducted any audit, validation, or verification of such data. Mirae Asset Global Investments accepts no liability for any loss or damage of any kind resulting out of the unauthorized use of this document. Investment involves risk. Past performance figures are not indicative of future performance. Forward-looking statements are not guarantees of performance. The information presented is not intended to provide specific investment advice. Please carefully read through the offering documents and seek independent professional advice before you make any investment decision. Products, services, and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries, and/or distributors of Mirae Asset Global Investments as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction.
Hong Kong: This material is prepared by Mirae Asset Global Investments (HK) Limited (Mirae HK). Mirae HK is regulated by the SFC (CE reference: ALK083).
United Kingdom: This document does not explain all the risks involved in investing in the Fund and therefore you should ensure that you read the Prospectus and the Key Investor Information Documents (“KIID”) which contain further information including the applicable risk warnings. The taxation position affecting UK investors is outlined in the Prospectus. The Prospectus and KIID for the Fund are available free of charge from http://investments.miraeasset.eu, or from Mirae Asset Global Investments (UK) Ltd., 4th Floor, 4-6 Royal Exchange Buildings, London EC3V 3NL, United Kingdom, telephone +44 (0)20 7715 9900.
This document has been approved for issue in the United Kingdom by Mirae Asset Global Investments (UK) Ltd, a company incorporated in England & Wales with registered number 06044802, and having its registered office at 4th Floor, 4-6 Royal Exchange Buildings, London EC3V 3NL, United Kingdom. Mirae Asset Global Investments (UK) Ltd. is authorised and regulated by the Financial Conduct Authority with firm reference number 467535..
Coronavirus Exposing Value in Asia
Figures for the coronavirus outbreak in China totalled 80,754 as of 9 March 2020. According to the National Health Commission there were 3,136 reported fatalities with 59,897 recovered cases. The Chinese mainland reported 19 new cases of confirmed infections, 36 new cases of suspected infections, and 17 deaths (all in Hubei province).
In response to the virus, the Chinese government has pushed for more counter-cyclical efforts as well as the implementation of expansionary fiscal and expansionary monetary policy. Under the quarantine and back-to-work policies, President Xi highlighted the importance of implementing epidemic control measures while also resuming production in areas classified as low risk. Multiple cities have revealed policies that will help subsidise home purchases. The National Development and Reform Commission (NDRC) temporarily cut unit prices of electricity as well as natural gas. Largely, efforts to control the outbreak in Wuhan and Hubei include setting up 42 designated hospitals, 21,574 beds to treat patients, 10,317 additional beds in shelters to handle patients showing milder symptoms and 27,387 medical staff who have come in across the country to provide support. (These figures are as at 20 February 2020 and sourced from Bloomberg, the WHO and Chinese press reports).
Economic Disruption Persists
Although provinces in China have resumed business activities, the country still faces a shortage of workers in the movement of goods. Activity levels remain at 20-30% of 2019 historic levels. Provinces such as Guangdong (a hub for electronics) and Hebei (a hub for metallurgy) have resumed manufacturing activities faster than other municipalities.
Various sectors are being impacted. This includes tourism & hospitality, aviation/airlines, luxury goods, automotive sector, consumer products as well as consumer electronics & semi-conductors domestically.
The Next Few Weeks are Critical
We believe that the worst is over for China and the next month-and-a-half should see supply chains come back. Factories are at 30-40% utilisation, so the priority is to resume production gradually while controlling a further outbreak of the virus. Markets, however, are uncertain of the outlook in impacted countries; particularly Korea, Italy and Iran. The next few weeks will be key for investors to assess the economic disruption caused by the virus.
In a bear case scenario, countries other than China reporting an exponential increase of infected cases could pose a bigger threat to markets than first anticipated.
As seen in Korea, the sudden spike of cases mean we cannot easily predict which potential countries could be affected next. This uncertainty will have an impact on the world economy.
Furthermore, given quarantine restrictions are not being followed by all countries around the world, there is a risk that infections may be much harder to contain. We draw comfort in not seeing new large scale cases outside of Hubei, but are keeping watch as seen with the rise of new cases in Italy, Korea and Iran.
We still see semiconductor names as relatively resilient; Korea has resumed production in factories post the weekend disruption. Moreover, in the last couple of weeks with individuals forced to stay indoors and work from home, we’ve seen a big spike in data centre traffic with a huge increase in time spent on social media, games, online entertainment and education.
In the ASEAN region, there are three key factors on investor’s minds:
• The First: fear of the virus spreading beyond China which will disrupt Asian manufacturing supply chains.
• The Second: higher import prices or lack of supply will have an impact on net importers.
• Finally: ASEAN countries such as Thailand, Philippines and Vietnam have become reliant on Chinese and Korean tourists. Given the situation, tourism flow may remain subdued for at least the next two quarters.
Investment Strategy – We’re Still Bullish on Asia
Medium-term, we continue to remain positive on Asian markets and are confident that growth should recover after Q1, 2020. With inventory levels low globally, we may see a strong order momentum in the coming months to replenish stock.
In China, we believe things should improve considerably post Q1, 2020. We maintain our views and do not seek to change our positions. Overall, we are seeing 70% of scheduled flights down and jet fuel demand for February drop to 77% year-on-year. We believe the turning point for tourism will be when the WHO lifts its global alert on the virus, similar to SARS. Further, the vast majority of companies within our portfolio that are in online entertainment, education, food delivery and finance sectors have fairly robust digital interfaces. These companies should see a market share shift from their pure brick and mortar peers.
In India there are not many virus cases being reported, providing some level of comfort. The economic recovery may be delayed from negative sentiment globally but will still be underway nevertheless. Our medium-term view on India is still positive. With a forecast recovery in place, we’re positioning ourselves with an overweight exposure in financials, real estate, consumer discretionary and healthcare sectors. We are expecting rural demand recovery and with increased compliance post-GST, which should lead to higher growth for organised sectors.
Deep value exists in some of state-owned enterprises in the energy & utility space. Should the Modi Government pursue the much-articulated path of privatisation of these assets, meaningful upside can be realised over the next 12-18 months. The spread of the coronavirus, along with the trade war & tax cuts, may hasten the diversification of supply chains away from China to India, a positive from a medium-term perspective.
Outside Asia, global markets are sanguine on the back of improving PMIs, a function of inventory restocking demand and expanding Central Bank balance sheets. For Asian equities, as investors get confidence the coronavirus situation is not significantly deteriorating, markets should bottom.
Overall, the impact of the virus will affect performance in the short-term. To put it into perspective, a quarter of negative sentiment and growth is priced in post a 5-7% market correction, but will not have a material impact on long-term portfolio holdings.
Invest in Sector Leading Companies
Mirae Asset focuses on identifying ‘Sector Leaders’ that will benefit from competitive advantages and deliver sustainable growth over the long-term.
Disclaimer
This material is neither an offer to sell nor solicitation to buy a security to any person in any jurisdiction where such solicitation, offer, purchase or sale would be unlawful under the laws of that jurisdiction. Investment involves risk.
The information in this material is based on sources we believe to be reliable but we do not guarantee the accuracy of completeness of the information provided. This material has not been reviewed by SFC and shall only be circulated in countries where it is permitted.
This material is intended solely for your private use and shall not be reproduced or recirculated either in whole or in part, without the written permission of Mirae Asset Global Investments. This document has been prepared for presentation, illustration and discussion purposes only and is not legally binding. Whilst compiled from sources Mirae Asset Global Investments believes to be accurate, no representation, warranty, assurance or implication to the accuracy, completeness or adequacy from defect of any kind is made. The division, group, subsidiary or affiliate of Mirae Asset Global Investments which produced this document shall not be liable to the recipient or controlling shareholders of the recipient resulting from its use. The views and information discussed or referred in this report are as of the date of publication, are subject to change and may not reflect the current views of the writer(s). The views expressed represent an assessment of market conditions at a specific point in time, are to be treated as opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. In addition, the opinions expressed are those of the writer(s) and may differ from those of other Mirae Asset Global Investments’ investment professionals.
This material is neither an offer to sell nor solicitation to buy a security to any person in any jurisdiction where such solicitation, offer, purchase or sale would be unlawful under the laws of that jurisdiction.
Investment involves risk. The information in this material is based on sources we believe to be reliable but we do not guarantee the accuracy of completeness of the information provided. This material has not been reviewed by SFC and shall only be circulated in countries where it is permitted.
This material is intended solely for your private use and shall not be reproduced or recirculated either in whole or in part, without the written permission of Mirae Asset Global Investments. This document has been prepared for presentation, illustration and discussion purposes only and is not legally binding. Whilst compiled from sources Mirae Asset Global Investments believes to be accurate, no representation, warranty, assurance or implication to the accuracy, completeness or adequacy from defect of any kind is made. The division, group, subsidiary or affiliate of Mirae Asset Global Investments which produced this document shall not be liable to the recipient or controlling shareholders of the recipient resulting from its use. The views and information discussed or referred in this report are as of the date of publication, are subject to change and may not reflect the current views of the writer(s). The views expressed represent an assessment of market conditions at a specific point in time, are to be treated as opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. In addition, the opinions expressed are those of the writer(s) and may differ from those of other Mirae Asset Global Investments’ investment professionals.
The provision of this document shall not be deemed as constituting any offer, acceptance, or promise of any further contract or amendment to any contract which may exist between the parties. It should not be distributed to any other party except with the written consent of Mirae Asset Global Investments. Nothing herein contained shall be construed as granting the recipient whether directly or indirectly or by implication, any license or right, under any copy right or intellectual property rights to use the information herein. This document may include reference data from third-party sources and Mirae Asset Global Investments has not conducted any audit, validation, or verification of such data. Mirae Asset Global Investments accepts no liability for any loss or damage of any kind resulting out of the unauthorized use of this document. Investment involves risk. Past performance figures are not indicative of future performance. Forward-looking statements are not guarantees of performance. The information presented is not intended to provide specific investment advice. Please carefully read through the offering documents and seek independent professional advice before you make any investment decision. Products, services, and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries, and/or distributors of Mirae Asset Global Investments as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction.
Hong Kong: This material is prepared by Mirae Asset Global Investments (HK) Limited (Mirae HK). Mirae HK is regulated by the SFC (CE reference: ALK083).
United Kingdom: This document does not explain all the risks involved in investing in the Fund and therefore you should ensure that you read the Prospectus and the Key Investor Information Documents (“KIID”) which contain further information including the applicable risk warnings. The taxation position affecting UK investors is outlined in the Prospectus. The Prospectus and KIID for the Fund are available free of charge from http://investments.miraeasset.eu, or from Mirae Asset Global Investments (UK) Ltd., 4th Floor, 4-6 Royal Exchange Buildings, London EC3V 3NL, United Kingdom, telephone +44 (0)20 7715 9900.
This document has been approved for issue in the United Kingdom by Mirae Asset Global Investments (UK) Ltd, a company incorporated in England & Wales with registered number 06044802, and having its registered office at 4th Floor, 4-6 Royal Exchange Buildings, London EC3V 3NL, United Kingdom. Mirae Asset Global Investments (UK) Ltd. is authorised and regulated by the Financial Conduct Authority with firm reference number 467535..
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KIIDs”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KIIDs can be obtained from www.am.miraeasset.eu/fund-literature . The Prospectus is available in English, French, German, and Danish, while the KIIDs are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KIID before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Australia: The information contained in this document is provided by Mirae Asset Global Investments (HK) Limited (“MAGIHK”), which is exempted from the requirement to hold an Australian financial services license under the Corporations Act 2001 (Cth) (Corporations Act) pursuant to ASIC Class Order 03/1103 (Class Order) in respect of the financial services it provides to wholesale clients (as defined in the Corporations Act) in Australia. MAGIHK is regulated by the Securities and Futures Commission of Hong Kong under Hong Kong laws, which differ from Australian laws. Pursuant to the Class Order, this document and any information regarding MAGIHK and its products is strictly provided to and intended for Australian wholesale clients only. The contents of this document is prepared by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Australian Investments & Securities Commission.
Copyright 2021. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.