The market fallout from the coronavirus pandemic will see continued volatility across equity, credit and commodity markets – but also potential investment opportunities.
A stronger revalued yuan is vital to any post-coronavirus global economic recovery, with reinvigorated Chinese financial firepower helping to swerve a deep recession in the next year, according to Toscafund Asset Management’s Savvas Savouri.
Recent spikes in Korean stock market volatility following the global sell-off could see an upswing in margin calls in its autocallables market, potentially driving the index even lower, with investors taking advantage of the higher volatility to obtain higher yields.
Oil prices plummeted on Monday morning as the impact from the coronavirus outbreak – coupled with a Saudi Arabian price cut – dragged global stock markets lower, with a number of major hedge funds standing to gain from the commodities crash.
The impact of the coronavirus outbreak is revealing underlying weaknesses in emerging market debt, according to Man GLG.
The rapid stock market sell-off – which saw the S&P 500 slide 3 per cent again on Thursday, with the FTSE 100 down 3.5 per cent on Friday morning – is unlikely to end the long equity bull market run, according to Target QR Strategies, the US hedge fund investment adviser.
Trend-following hedge fund strategies’ strong start to 2020 was eroded during last month’s market volatility, leaving CTAs down for February and flat year-to-date.
Absolute Return Partners recommends keeping a lid on equity beta positions as US stocks look set to mean-revert following their long bear run – with shipping and uranium being two investment themes arising out of the move.
By Don Steinbrugge, Agecroft Partners – Equity markets around the world sold off last week because of uncertainty relative the Coronavirus’ impact on the global economy and corporate profits. No one knows how bad the economic impact might be, but the worst case scenario or potential “tail risk” is truly frightening relative to loss of life, contraction in global GDP and implosion in the financial markets.
With global markets in freefall on the back of coronavirus fears, BlueBay Asset Management recommends curbing risk levels for now - but suggests alpha opportunities will arise from this week’s market mayhem.