Kristiaan Rehder, portfolio manager at Kardinia Capital has commented on how markets are set to shift as distribution of a COVID vaccine creeps closer.
Oxford-AstraZeneca has presented the third candidate for a COVID vaccine on Tuesday, following competing pharmaceutical companies Pfizer and Moderna.
The Australian government has committed to buying doses of the Oxford-AstraZeneca vaccine, as one of the four deals it previously agreed to. It is understood the vaccine could start to be rolled out from March.
But in a sense, a viable vaccine, while lifting markets in the short-term and bolstering a recovery from the crisis, would present a risk to certain stocks that had performed well through COVID.
“There are clear beneficiaries of COVID,” Mr Rehder said.
“So if you look at e-commerce retailers and I’m thinking about Kogan here, RedBubble, Temple & Webster, even if you’re thinking about stocks such as JB Hifi and Harvey Norman, they have had a tremendous tailwind for this COVID period. And you can almost brand them lockdown beneficiaries.”
On the other hand, stocks that had suffered through lockdowns are set to rebound with a vaccine.
He added that his team had been quietly acquiring travel stocks ahead of the domestic economy beginning to reopen, such as Qantas, Flight Centre and Sydney Airport.
“It was quite interesting in our portfolio, we’ve been quietly accumulating re-opening stocks, but on the day after the Pfizer announcement a couple of weeks ago, we actually saw our reopening stocks up 6 per cent, but our lockdown stocks down 8 per cent. That’s a 14 per cent differential,” Mr Rehder said.
“What we believe is when you see a violent rotation like that, it tends to not be a one-day event, it tends to persist through time. And I suspect that’s going to be a feature going through into 2021.”
But while three pharmaceutical companies have signalled they are developing vaccines with efficacy rates of at least 92 per cent, Mr Rehder noted it will be a while yet before the broader global population gains access.
“I would throw into the mix that it’s going to take a huge effort from a logistical supply chain to get the vaccines out there, manufacturing supply chains need to be built, distribution logistics have to be rolled out,” he said.
“Both Pfizer and Moderna are talking about 20-50 million vaccines this year. The bulk of that heavy lifting is going to be next year. We believe it’s going to be likely around June 2021 before doses will be sufficiently available to actually have a meaningful impact, so that’s going to take time.”
Following his election victory, US President-elect Joe Biden has elected his own advisory panel on COVID, with 30 members. A number of the experts have indicated plans for a partial lockdown across the US – which could have a sizeable impact on the US economy, and by turn, the Australian economy.
Mr Rehder also looked to Germany’s approach to combatting the virus, saying it could signal how more countries are set to approach it.
“We think that this has got much further to go, we think economies are going to be slowly opening up and not just here in Australia, and we’ve obviously seen a lockdown or further restrictions in Europe,” Mr Rehder said.
“If you look at that approach, for example, the Germans are adopting, compared to how they confronted the virus, back in the first wave – it’s a very different approach. They’re using a more targeted way of restricting the movement of people. Schools in Germany are still open, they’re really targeting the bars and nightclubs and restaurant scene.
“I think there’s going to be increasingly a momentum to open up and if there are restrictions to be had, to be much more targeted in their approach and that will just continue to provide a tailwind for a number of these stocks.”
