- Fever hotspots in US? Real time vehicle traffic? Analysts are looking at unusual data sources to make their bets
- What if the virus comes back? That kind of 'Stephen King' question keeps analysts up at night
Simon Powell watches fever hotspots in America. Stephen Innes pores over real-time measurements of vehicle traffic " or the lack of it " in cities around the globe. And, Mark Galasiewski studies stock performance charts from the time of Sars and the 1968 flu pandemic.
The three financial analysts are tapping diverse and sometimes quite esoteric data to try to predict how the spreading coronavirus pandemic will affect the price of assets " everything from stocks on Hong Kong's Hang Seng Index to gold and orange juice futures.
Even obesity rates in the US may be worth pondering because they might explain why young people seem to account for a higher portion of infections in America than in China. That, in turn, has implications not only for short-term stock prices but also for the future of the US workforce.
And those orange juice futures? They spiked, signalling a surge in demand for Vitamin C just when supplies were getting harder to transport.
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"Economics in the time of Covid-19 is a different beast, with the best data being real time that provides insight into the extent of the slowdown," said Thailand-based Innes, chief global asset strategist at AxiCorp, who finds himself up before dawn to check data from other parts of the world.
"I'm using more real-time data now than I ever have before. I would never ever care about initial (US unemployment) claims, but it is huge now. … I would never wake up at 2am (to check it) on such a regular basis," he said.
"One of the more interesting ones is traffic data from TomTom. It shows the speed with which Houston went into a virtual shutdown, which both illustrates the ghost town outlook due to the collapse of the shale industry and mobility restrictions," he explained.
Coronavirus turns stock markets into the wildest ride on the planet " and that's not likely to change soon
Even from a strictly financial perspective, this moment is like being trapped in the early chapters of a Stephen King horror novel, he says. And the saga of this pandemic is unfolding in terrifying twists and turns that are buffeting the portfolios handled by professionals and family investors alike.
Here are five questions investors should be asking.
1. When will markets hit bottom?
Volatility is generally expected to continue in Hong Kong and elsewhere for at least the next few weeks.
Powell, the global head of thematic research at Jefferies, thinks global markets have further to fall.
"What the market is trying to figure out is, 'Are we in for a global recession? Could it actually be a thing that starts with a 'D' " a depression? And how much stimulus might be needed to dampen the impact on people's lives?
"If the economy grinds to a halt globally, then maybe there could be another leg down in markets … This shock could be bigger than anything we've seen since WWII in terms of shock to global trade and global demand," Powell said.
Some analysts believe a bottom is likely already behind us " at least in Hong Kong and China, and possibly in the US.
"From now on, the (Hong Kong) market will stabilise a bit, because the wave of panic selling and liquidation is over," said Alex Wong, director of asset management at Ample Capital.
Twice in recent weeks " on March 19 and March 23 " the Hang Seng Index closed below 22,000. It won't go lower, Wong predicts, saying it will now trade between 22,000 and 26,000, as traders finish shifting to more promising sectors and gain confidence in making larger bets.
2. Is anywhere a fairly safe place to invest?
Predictably, analysts point in different directions.
In Hong Kong, avoid retail, local property, as well as airlines, restaurants, casinos and anything else connected with tourism, argues Wong of Ample Capital.
Last week saw investors shifting out of those sectors and into social media giant Tencent and other new-economy stocks likely to thrive on lockdowns and work-from-home directives.
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Yet casino operator Galaxy Entertainment is one of the pummelled stocks liked by Morningstar's Lorraine Tan. She also points to Anta Sports, which like Galaxy is listed in Hong Kong, and US-listed Ctrip.com, a Chinese online travel agency.
"It has been difficult to keep on top of the rapidly shifting environment, but collectively we find more opportunities to buy than sell shares at the current level," said Tan, Morningstar's director of equity research, Asia.
"We think there are a number of names with strong competitive advantage that investors should consider adding to their portfolios as well as heavily sold-down stocks that could see a good post-virus bounce," she added.
China's health care, infrastructure stocks lure global bargain hunters even as coronavirus pandemic roiled equity markets in March
In the US, Wong likes e-commerce giant Amazon, Microsoft, and Netflix.
Internet-based companies are seeing a surge in traffic, Goldman Sachs analysts note.
Those include Tencent Holdings, China Literature, office software maker Kingsoft, all listed in Hong Kong, and Chinese game-streaming platform Huya, and Baozun, which helps foreign brands sell to online Chinese customers, both of which are listed in the US.
3. Is a virus-triggered downturn different from an ordinary financial crisis?
In many ways, yes.
US Federal Reserve chairman Jerome Powell stressed that the US economy, the world's largest, was fundamentally strong before the pandemic and predicted that it will rebound quickly once the virus's spread is controlled. That makes today's situation different from, say, the 2008-2009 global financial crisis, which was caused by underlying financial problems.
But the modern world has never been assaulted by a pandemic of this scale, and its threat to global GDP is undeniably real, as is the danger " pointed out by US infectious disease expert Anthony Fauci " that this coronavirus come back until there is a vaccine.
"We're dealing with a pandemic economic crisis that, at this stage, is medically unstoppable, which is flat-out scary, which we only thought existed in Stephen King's horror stories," AxiCorp's Innes said.
"We tend to overlook that during the (2008) Lehman(Brothers' bankruptcy) crash, outside the financial sector, life went on. In essence, restaurants took bookings; taxis took rides; shops were still bustling. This time around, the entire world is on the precipice of shutting down. Unemployment will soar," Innes said.
Indeed, US unemployment already has, skyrocketing to an unprecedented 3.3 million claims last week alone " up from about 200,000 just three weeks ago.
Yet Galasiewski, chief equity analyst for Asia and emerging markets at Elliott Wave International, is positively bullish. His study of infectious diseases has lead him to see them as long-term buy signals in the local markets. Sars in 2002, for example, led to a tremendous bull run in Hong Kong. He is now especially bullish on stocks listed in China, where the coronavirus outbreak began.
"A big advance has begun in the main Asia and emerging market indexes. This is not just a rebound. It's the early stages of a secular bull market," he said, referring to a long period of rising stock prices due to policy supports.
4. What data might offer clues for smart asset management?
Analysts are closely watching Italy's new infection totals to see whether its containment efforts are beginning to work. The numbers coming out of Italy will help analysts project the length and depth of the crisis in the world's largest economy, where the pandemic is much newer.
The US Federal Reserve and government have thrown in the "kitchen sink" to try to keep businesses and workers afloat. So analysts are looking for economic indicators that show that the US effort is having the desired effects of increased lending and stable stock markets, for example.
And, of course, analysts are watching for news of promising therapies and a vaccine, generally not expected until next year.
Unusual windows into the virus include TomTom.com, which shows real time traffic around the globe, Kinsa's tracking of fevers in America through smart thermometers (healthweatherus.com), and the Centre for Disease Control and Prevention's website, which is tracking infections and deaths, as well as outbreaks of influenza-like illnesses on its FLUVIEW chart.
"I never thought I would be looking at the collective body temperature of people in the US," said Jefferies analyst Powell.
5. What are the 'what ifs' ahead?
What if the pandemic dies away but comes back with equal fury?
What if people who recover remain infectious?
What if the disease causes permanent lung damage to young people? "Could we end up with a generation of people who are disabled and sick as a result of what this virus does?" Jefferies' Powell asks.
What if the pandemic explodes in India, a country with 1.3 billion people, an inadequate health care system and little sanitation for many countless slum dwellers?
India, now under a nationwide lockdown for 21 days, is the world's largest supplier of generic drugs. It has already halted the export of ventilators and an antimalarial drug used with some success against the new coronavirus.
What if a vaccine simply can't be found?
Despite everyone's endless "what ifs" about the future health of the world's people and finances, Powell, an experience yachtsman's who has weathered frightening tempests before remains hopeful.
"I am hugely optimistic that humankind can turn a veritable firehose of intellectual property and money and research and development at this virus to understand it and find a therapy and find a vaccine and get it out. Humankind has defeated many pandemic viruses …
"But investors do need to be cautious."
Additional reporting by Gigi Choy
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