Investors seem to be willing to see through near-term weakness expecting a V-shaped economic recovery.
The week that was, and the week that will be: it was all about COVID-19 last week, and this will likely be the case next week, too, Nomura's Chetan Seth wrote in a note on Monday.
Asian equities started this past week on a buoyant note as data showed that new daily cases of COVID-19 had slowed. While during the week, new daily cases surged due to a change in methodology, equities remained rather resilient as the market continued to focus on the rate of new daily cases, and seemed to be willing to see through near-term weakness expecting a V-shaped economic recovery.
Meaningful Impact
The market focus this week will likely remain on the rate of new infections. Continued lockdown in major Chinese cities is likely to result in a meaningful impact on China's GDP growth in 1Q, and by extension global growth.
Thus, Nomura downgraded its earnings growth outlook for 2020F for Asia ex-Japan equities. There is further downside risk to these estimates (and index target) should the lock-down measures persist beyond March. This is a key risk for equities, Seth added.
