DM Monitoring
LONDON: Investors expecting an imminent COVID-19 vaccine are beginning to buy bank stocks and industrials in anticipation of a roaring return in consumer confidence, though many remain wary of risks in sectors ravaged by the pandemic.
The development of some kind of preventative medicine is seen as the best chance of halting the coronavirus, which has killed 1.2 million people and is the top issue for money managers eyeing the next major shift in financial markets. As the market hype around the U.S. election ebbs, investors are now preparing for good vaccine news, which they believe is a matter of when, not if.
“It’s going to be absolutely massive,” said Stuart Oakley, head of cash currency trading at Nomura in London. “If we get a vaccine, we’re going to see all that pent up demand coming out.” Of the roughly 45 vaccines undergoing human trials, those from Pfizer PFE.N and Moderna MRNA.O are seen as possibly winning regulatory approval this year, with AstraZeneca AZN.L not far behind.
Investors are looking beyond an expected “excitement rally” and at longer-term beneficiaries and short-selling opportunities. “What we’ve done is given ourselves some optionality for a recovery trade, or a vaccine trade, by having some exposure to financials,” said Binay Chandgothia, a Hong Kong-based portfolio manager at Principal Global Investors.
Banks benefit from increased economic activity and would be helped if bond yields rose, he said, adding he had increased exposure to growth-sensitive small companies and would buy stocks in Singapore and Hong Kong if trade and travel pick up.
Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management in Wisconsin, said industrials offered broad exposure to a rebound in confidence in areas from building products to aviation.
Deutsche Bank manages a “vaccine basket” of Singapore dollars and Thai baht, seen benefitting from increased trade and tourism, against the Philippine peso, which is weighed by rising imports.
Shinji Naito at Japan’s SPARX Asset Management, which has $12 billion under management, hopes a vaccine could trigger a payoff from shorts in stocks pumped up by the pandemic, such as some technology firms, while helping long investments such as realtor Tokyo Tatemono 8804.T.
Dave Wang, a portfolio manager at Nuvest Capital in Singapore, said long-short pairs could wring gains from what is likely to be an uneven recovery.
