The Covid-19 virus outbreak and oil price collapse have led to a global stock market collapse, but DBS believes the combination of two «black swan» events is a boon for investors.
An eventual market rebound from the current economic crisis will depend on how fast developed economies manage to contain the Covid-19 outbreak and how robust and coordinated the global economic rescue package will be, DBS' Hou Wey Fook said at a media briefing on Thursday.
The bank's chief investment officer said there is a higher probability of a «U-shaped» recovery, given the non-economic nature of the supply shock.
He cited the 9/11 attacks, Sars outbreak, and Fukushima nuclear disaster, which rebounded by an average of 23 percent over a three-month period after hitting a trough, but tempered expectations because of the larger scale of the current crisis.
«Window of Opportunity»
The current economic crisis is a «great window of opportunity for investors to deploy cash they have been sitting on» and is a «good time to construct robust portfolios,» Hou said.
He noted that the re-pricing of markets have already factored in a heightened risk of a global recession.
«After the massive meltdown, we believe a lot of the negative headwinds have already been substantially priced in,» he said.
Stay the Course
In its CIO Insights for the second quarter of 2020 titled «Built to Last,» published today, the bank recommended that investors remain engaged in the equities market.
It advocated for portfolios with globally diversified securities that focus on 1) income generators – corporate bonds and dividend-yielding equities, and 2) secular growth equities, in particular in technology, healthcare, and China. It also recommended adding gold as a risk diversifier.
Going forward, it said that infrastructure is an attractive income-generating asset class, given ongoing urbanization and large-scale transport and infrastructure projects, and highlighted long-term investment opportunities in sectors related to the growth of 5G communications.
