【宏观视角】全球经济 – 海外疫情推升避险情绪

The rapid rise of COVID-19 cases outside of China is a new development. Increasing global spread and uncertainty about its potential economic effect will continue to weigh negatively on investor sentiment and the risk of COVID-19 becoming a pandemic remains. Its global economic damage will largely depend on the spillover effect from China to other economies, the containment measures taken by global governments and the hit on global supply chains.

 

  • Risk-off sentiment retakes center stage. Since Feb 2020, we had witnessed record-high prices in risky assets, especially US equity and corporate bonds which has been supported by optimistic belief that the virus spread outside of China has been limited. Meanwhile, prices of risk havens, including gold, US dollar and long-term Treasury bonds, also climbed. However, the situation changed in the past few days due to the surge of new COVID-19 cases outside of China. With South Korea, Italy, Japan, Iran and several other countries hit hard, the new virus is starting to look more and more like a pandemic. Risk-off sentiment retakes the center stage of risky asset markets, indicating that investors are revising their assumptions about the scope and impact of COVID-19. We see that the evolution of the virus outside China remains uncertain and the number of new cases around the world will dominate the global market sentiment and increase market volatility.

   

  • Virus outbreak rattles the global economy: three main channels. Global economy started 2020 on a stronger footing with composite PMI accelerated to 10-month high of 52.2 in Jan. However, Jan data was collected before the COVID-19 outbreak. Besides sentiment, we see three main channels via which COVID-19 may cause potential damage to global economy:

     

1) Spillover effect from China to other places: Economies with higher exposure to China, namely Hong Kong, Thailand, Singapore, South Korea, Taiwan, Australia, etc., are more vulnerable to China’s virus-fueled slowdown with tourism, trade and financial markets expected to face severe hit. Disproportionate economic hit to Asian countries is inevitable.

     

2) Extraordinary containment measures implemented: For instance, South Korea has raised virus threat level to maximum. Containment measures such as travel and work restrictions are essential to control virus spread, but will also increase the hit to global economy.

    

3) Virus disrupts supply chains. Risks to multinational companies are profound as global supply chains are facing delays or inventory shortages. Disrupted Chinese supply chains and weaker global demand have started to take tolls. Moreover, the virus is further reshaping the existing supply chains. For example, French government would urge companies to review their “over-dependence” on China for raw materials and parts.

     

  • We have revised down our growth forecast. Our base case assumes the spread of virus to peak around Mar to Apr 2020 and infections largely remain limited in China and a number of other countries outside of China. Global economy is expected to grow by 2.7%, lower than our previous forecast 3.0%. The bull case is that China’s lockdown measures would gradually come to an end around late-Feb and spread outside of China remains limited and under control. In the worst scenario, virus could not be controlled quickly and effectively, China maintains restriction measures throughout 1H19 and cases accelerate in more regions around the global. In this case, global GDP growth rate may drop to 2.3% this year. To respond to the fallout, more central banks tend to further ease monetary policies.

   

  • Currencies: Asian currencies weaken and US dollar gets another safe-haven rush. Relatively, US economy will have much smaller impact from COVID-19 with fewer domestic cases and lower dependency on Chinese economy, making US dollar asset more attractive. US dollar index was surging toward 3-year peak last week. We need to keep looking to the performance of US fundamentals and the broader risk appetite trends for direction. The outlook on the dollar remains constructive which breaks 100, the psychological barrier soon.
点击阅读原文

公司地址:香港中环花园道三号冠君大厦45-46楼

电话:(852)3900-0888 传真:(852)3761-8788

招银国际版权所有 Copyright © 2019-2024 CMB International Capital Corporation Limited. All rights reserved.