SINGAPORE – Towards the end of 2020, it appears to have been a mixed year for markets in the Asia-Pacific region as the world continues to seek a recovery from the coronavirus pandemic.
China’s Shenzhen component is a standout component of the region’s major markets, up 38.73% in 2020. The country’s CSI 300 index, which shows the largest companies listed on the mainland, was also one of the region’s top performers with an increase of 27.21% in the reporting year.
These numbers reflect China’s tremendous economic recovery after the country imposed lockdowns earlier this year to contain the spread of the virus.
The South Korean Kospi also posted robust growth and rose by more than 30% over the course of the year.
Here is a look at 2020 performance for major Asia Pacific indices, based on CNBC calculations:
By comparison, the US state Nasdaq Composite is up 43.44% as of December 30th. The index broke several records this year as investors flocked towards its technical constituents. The sector benefited from changes in consumer behavior triggered by the pandemic, such as: B. increased remote work. The S&P 500 is also up 15.52% over the same period.
In Europe, the pan-European Stoxx 600 was down 3.75% by 2020 at the close of trading on December 30th.
Investors watch computer screens in a stock exchange hall in Nanjing, Jiangsu Province, China on July 13, 2020.
Jiang Ning | VCG | Getty Images
Northeast Asia: Potential Safe Haven for Investors
According to Jim McCafferty, joint head of Asia-Pacific equity research at Nomura, global investors could favor stocks in China, Japan, Taiwan and South Korea by 2021.
“We believe that the governments of the region’s Covid management practices in Asia have been far superior to those seen in the West, and I think the market is evolving,” McCafferty told CNBC’s “Squawk Box Asia” late in November.
“The weight of money in this region is usually Northeast Asia,” he said. “I think that many global investors who need to invest in stocks will truly see Northeast Asia as a safe haven by 2021.”
Still, countries like Japan and South Korea have seen an increase in viral infections in recent weeks – albeit on a relatively small scale compared to their Western counterparts.
Risk of vaccine distribution
Stephen Davies, CEO of Javelin Wealth Management, told CNBC’s Street Signs Asia in mid-December that the time for the coronavirus vaccine to roll out was a risk factor.
“I’m not exactly sure it’s unique to Asia, but the risk, of course, is that the vaccine will take much longer to roll out than expected,” Davies said.
This could cause recovery trade to “last longer” and “drowsy” markets as investors see the economic impact not go away anytime soon, he said.
To date, two vaccines – one from Pfizer-BioNTech and the other from Moderna – have been approved by the US FDA for emergency use. White House coronavirus advisor Dr. Anthony Fauci, recently told CNN that the vaccine roll-out has been slower than expected.
In Asia, Singapore was the first country to receive the Pfizer BioNTech vaccine regionally in December, according to local media reports.
The risk for the downside is that the vaccine will take much longer to launch than expected.
Stephen Davies
CEO, Javelin Wealth Management
However, Davies noted that in the early days of the pandemic, experts had predicted that an effective vaccine against the coronavirus would take years to develop. This timeframe has been shortened drastically. “So far, those expectations have proven unnecessarily pessimistic,” said Davies.
“We are still on the positive side and are still working to ensure that the economic recovery will be felt across the board by the end of 2021,” said the CEO.
Richard Harris of Port Shelter Investment Management told CNBC’s Squawk Box Asia on Wednesday that the markets “look pretty good for 2021”. Valuations may still be high, but Harris suggested that the market is likely being driven by “tremendous liquidity” as major central banks around the world saw “huge increases” on their balance sheets.
“We’re looking at about five times the size of the balance sheets of the four big central banks, you know: Europe, US, Japan, UK,” he said. “That is a tremendous amount of money to be sloshed around in the system and it will find a home in assets.”
Additionally, good coronavirus-related news is expected to “drown out people’s concerns” on a regular basis over the next year.
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