Unless “elevated uncertainty” derails the entire global economy – which seems highly unlikely – excessive downward setbacks in prices could provide entry points to asset classes with attractive valuations and strong fundamentals, particularly emerging market equities.
“The short-term issue due to the Chinese situation may provide an opportunity to add to this asset class to play the extension of the cycle in uncrowded areas of the market, barring any disruption to the global outlook,” said Amundi Asset Management.
“Selection will remain crucial, because some sectors/stocks may be more vulnerable in the short term to the news flow on coronavirus. We focus on domestic stories, which are relatively insulated from the virus and which can benefit from strong domestic demand or the continuing shift in the value chain.”
Amundi expects strong growth in Vietnam, a slight rebound in activity in Indonesia, and for Singapore’s economy to benefit from stabilisation and the eventual pick-up of industrial production and global trade.
However, Amundi is obviously cautious on many sectors of the Chinese market.
“As the situation is still unclear and stock markets have corrected, we have become more cautious on the most vulnerable sectors in China, such as hospitality, aviation and consumer discretionary, which will arguably suffer some price pressure in the near term,” Amundi said.
“We have also become more defensive on tourism-related companies that benefit from Chinese tourists, for example, those listed in countries such as Thailand, Korea, and the Philippines.”
