United States 

COVID-19 cases across the globe further increased over the week, with situations in South Korea, Japan, Italy, and Iran significantly worsening. In particular, South Korea reported more than 500 new cases on Friday, bringing the total confirmed cases up to 2,337, the largest number of cases outside China. Back in the US, the CDC reported a possible case of ‘community spread’ of the virus in home soil, spreading fear in the market throughout the week. Over the past 5 days ending Thursday, S&P 500, Dow Jones, and NASDAQ fell 11.69%, 11.82%, and 12.15% respectively, which was the worst 5-day-rolling-return since the Financial Crisis back in 2008. Economic data released this week were mixed. The important consumer confidence index came in at 130.7, missing market expectations of 132.0, but still managed to record a slight increase over the January figure. The final 2019 Q4 GDP came in line with expectations, and durable goods were better than expected. Overall, we have yet to see the actual impact of the virus on the real economy and the extent of supply chain disruption. In light of the uncertainty, investors could pay more attention to upcoming data hinting at the virus impacts. Next week, various PMI data, non-farm payrolls, unemployment, and hourly earnings data will be released.

Europe

The COVID-19 epidemic spread like wildfire across the globe, confirmed cases in Italy and Iran skyrocketed over the week, triggering panic selling in the market. The UK FTSE, French CAC, and German DAX fell 8.21%, 8.86%, and 8.92% over the past 5 days ending Thursday. However, ECB president Lagarde downplayed the economic impact of the COVID-19 epidemic, claiming that the long term impacts on the economy are yet to be seen. That said, confirmed cases in Italy has exceeded 600, neighboring countries of France and Germany warned their citizens of the potential outbreak, given the close ties between EU members. Economic data showed surprisingly strong numbers from the German IFO Business Climate Index and the Eurozone business and consumer survey, both topping market expectations despite the looming COVID-19 outbreak on the continent.  Next week, more data on various PMIs, CPIs and retail sales will be released.

China

Risk off due to the global spread of COVID-19 epidemic eventually affected market sentiment in the China and Hong Kong stock markets. Over the week, the CSI 300 Index and the HSI fell 5.05% and 4.32% respectively. As the COVID-19 outbreak initially started in the region, the Chinese and Hong Kong stock markets fell first. Thus, during this downturn, the respective markets suffered less loss than global markets. However, the Shanghai Composite Index still fell below the 100-day and 200-day-moving-average this week. During the week, the net sell via Stock Connect set a record high, and the combined stock market turnover has exceeded one trillion yuan for eight consecutive trading days, matching the previous record in 2015. As China has started to resume economic activities, whether there will be any further large scale outbreak could be answered over the next two weeks, investors could closely monitor the relevant data in the weeks to come. As for Hong Kong stocks, as it is expected that the Chinese government will increase infrastructure spending to stimulate the economy, capital inflow to relevant sectors can be worth noting.

• Recent activities include : Harris Fraser held a Press Conference on “2020 Global Investment Market Outlook”, Attended Bloomberg Businessweek/Chinese Edition Top Fund Awards 2019
• Columns, media interview and online channels : “TVB News”,“TVB Big Big VIP”, “Now FINTERVIEW”, “iCable Finance”,“iCable News”, “Capital”, “SingTao Newspaper”, “Sing Tao Investment Weekly”, “Headlines News” , “ET Net”, “OrangeNews”, “Quamnet” and online videos produced by Harris Fraser Group. (including but not limited to the above)

United States 

The spread of the COVID-19 epidemic accelerated in Japan and South Korea, while the China National Health Commission announced that as at 20 February, there are 75,400 confirmed cases in China. Market sentiment remained weak due to virus woes, and overall global markets underperformed. Over the past 5 days ending Thursday, the S&P 500 and the Dow fell 0.18% and 1.12% respectively. However, the NASDAQ rose by 0.26%. The January FOMC meeting minutes were released this week, showing that the economy was stronger than expected at the end of January, most officials see the current interest rate policy as appropriate for "quite a period of time." However, opposing views still existed within the committee, and Fed Vice Chairman Clarida emphasised that most economists do not expect rate cuts any time soon. According to the Bloomberg interest rate futures data, market predicts that the Fed will cut interest rates at least once before the end of the year. Next week, the United States will release the revised GDP figures for 2019 Q4, the market expects that the annualised increase will be revised slightly upwards from 2.1% to 2.2%. In addition, the United States will also announce the finalized figures of the January Core PCE, the February Consumer Confidence figures, and the University of Michigan Consumer Sentiment Index in February.

Europe

European equity performance was unsatisfactory over the week, with the UK FTSE, French CAC, and German DAX falling 0.22%, 0.51%, and 0.59% over the past 5 days ending Thursday. The Vice President of the European Central Bank (ECB) Guindos affirmed that the Eurozone economy is growing moderately, but mentioned that sluggish trade and the COVID-19 epidemic will lead to increased uncertainty in the economic outlook. As for economic data, the February Eurozone ZEW Economic Sentiment fell from 25.6 to 10.4, while the Eurozone Consumer Confidence Index came in at negative 6.6, which improved over the previous value of negative 8.1 and beat market expectations of negative 8.2. The Eurozone will announce the final figures of the February consumer confidence index and the February CPI next week. The market expects the YoY increase in CPI to fall from 1.4% to 1.2%. If inflation data continues to weaken, it may further solidify market expectations for the ECB maintaining a dovish stance.

China

China and Hong Kong stock markets had mixed results this week. A-shares continued the rebound with large trading volumes. The Shanghai Composite Index reclaimed the 3,000 level, closing at 3,039 on Friday, up 4.2% over the week. The Hong Kong Hang Seng Index met resistance at the 28,000 level and subsequently fell, closing at 27,308 on Friday. Under the influence of the epidemic, the local economy remains under pressure, it was speculated that the Chinese government may increase market liquidity to support the A-shares. This week, the People's Bank of China and the Ministry of Finance increased their efforts to strengthen monetary and fiscal policy amidst the COVID-19 epidemic. In particular, the central bank cut MLF and LPR interest rates respectively. A-share market sentiment remains positive.

• Recent activities include : Harris Fraser held a Press Conference on “2020 Global Investment Market Outlook”, Attended Bloomberg Businessweek/Chinese Edition Top Fund Awards 2019
• Columns, media interview and online channels : “TVB News”,“TVB Big Big VIP”, “Now FINTERVIEW”, “iCable Finance”,“iCable News”, “Capital”, “SingTao Newspaper”, “Sing Tao Investment Weekly”, “Headlines News” , “ET Net”,“OrangeNews”, “Quamnet” and online videos produced by Harris Fraser Group. (including but not limited to the above)

We retain our positive view on fixed income in 2020. Although central banks across the globe did not slash rates in the first rate decision of the year, this leaves ample headroom for future rate cuts later in the year. As always, the ongoing quantitative easing offers upside potential with downside protection. The latest fed meeting further confirmed that the QE programme will extend at least until April, which solidifies the short-term positive outlook for bonds.

We highlighted the volatility and downside risk for equity markets in 2020, which tensions in the Middle East, Brexit in Europe, impeachment in US, COVID-19 in China, and of course the unresolved trade war all contribute to the increasing risk profile of global equity markets. As the 2020 uncertainties remain, we continue to suggest allocating a portion of the investment in bonds to limit volatility and diversify risk in the portfolio, introducing bond exposure in the investment portfolio could provide a better risk adjusted return.

In line with our 2020 outlook on emerging markets, external shocks remained the key factor in EM performance. While trade barriers have decreased, the COVID-19 epidemic would likely dampen Chinese economic growth, reducing global demand, which might have a ripple effect on the global economy in 2020. EM economies which are often highly exposed to external markets might find rebounding the economy difficult in the short to mid-term.

As external risks mount, we would advise to take caution before investing in EM equities, although it is expected that EM economies should outgrow DM economies in 2020, the extent of damage caused by the epidemic would still require further investigation. Thus, we remain neutral on EM in the short to mid-term.

Chinese stocks rallied in the earlier portion of the month on the back of the successful Sino-US trade deal negotiation and the subsequent signage in Washington, but as the severity of the COVID-19 epidemic was unveiled, doubt is casted over the Chinese economic outlook.

Disregarding the epidemic, the overall economy continued to stabilise, various PMIs remained above the 50 level, industrial production also remained resilient, PPI also returned positive after six consecutive negative months. That said, industrial profits fell, exporting sectors continued to be exposed to internal and external risks. With the coronavirus outbreak yet to be contained, economic growth in China is likely to further slowdown.

Although the monetary policy enacted in early January should provide support to the markets, market sentiment stays vulnerable in the short to mid-term, and the long term economic prospect remains uncertain.

The biggest concern at the moment is the extent of damage caused by the COVID-19 outbreak, as the Japanese economy is relatively exposed to China, markets are concerned if the economy will take a hard blow as Chinese consumption falls, threatening economy revitalisation plans in Japan. With confirmed locally transmitted cases reported in Japan mainland, the outbreak also clouds Olympic prospects, as a more widespread impact could dissuade visitors, or even cause the event to be cancelled in extreme circumstances, potentially damaging the Japanese economy.

Yet, we stay positive on the economic outlook of Japan in 2020. Although the latest economic figures continue to show slight weakness, in particular soft PMI figures, which might be compounded with the ongoing virus outbreak. Yet, the key fiscal stimulation plan of Prime Minister Shinzo Abe should still provide much support to the Japanese economy, supporting the equity markets performance.

On the Brexit front, more EU officials including Commission President Ursula von der Leyen spoke as the UK proceed with Brexit, highlighting the overly short timeframe for negotiation, it is widely expected that there is unlikely to be any trade deal made within the 11-month transition period. The only silver lining amidst the chaos is the certain exit of the UK, as the European parliament backed the official UK withdrawal plan, which allows European corporations to plan accordingly.

European economic fundamentals stayed weak but showed signs of revitalisation. Eurozone manufacturing PMI continued to contract for twelve consecutive months, while the Euro Area Economic Sentiment Indicator recovered to 102.8 in January, reverting the downtrend. The European economy remains fragile with weaker growth drivers, the COVID-19 outbreak has yet to reflect its impact on the European economy, as there has been a higher dependence on China than market performance suggested. We see limited upside or even a possible market correction in the short-term as the impacts became better understood.

With the 1^st stage Sino-US trade deal finalised and signed in mid-January, market sentiment improved, US equities set new record highs in the month. US corporate earnings came in positive, with a majority reporting market beats. As the epidemic has limited impact to the US economy, there was no significant market correction. The January FOMC meeting resulted in no changes to the rate, but it is worth noting that the Fed promised that the current balance sheet expansion period will extend well into April, which provides additional support to markets.

Fundamentals stayed strong as expected, Q4 GDP met expectations, and the most important indicators of consumer confidence and various PMIs all exceeded market estimates, the US market remains a relatively attractive investment option with limited China exposure. Given the relative stable environment in the US, mainly due to a temporary ceasefire in the trade war, although global volatility increased over the month, we remain positive on the US equity markets in 2020.

United States 

Earlier this week, the number of new confirmed cases of COVID-19 in China continued to slowdown. The overall global stock market performed well, and US equities continued to hit new record highs. On Thursday, Chinese authorities announced that the number of newly diagnosed cases on Wednesday rose sharply, limiting US equity performance that night. However, over the past 5 days ending Thursday, the S&P 500, the Dow, and the NASDAQ rose 0.84%, 1.31%, and 1.46% respectively. Several US officials have shared their views on the economy. Fed Chairman Powell claimed that he is optimistic about the prospects of the US economy, he also reiterated his dovish stance; the Dallas Fed President similarly expected steady growth for the US economy this year. On the other hand, the New York Fed Reserve stated that it would further reduce the scale of overnight and regular repo operations starting on Friday. However, the Fed emphasized that the balance sheet expansion of US$60 billion per month will be kept unchanged. The minutes of the January FOMC meeting will be released next week, the market will focus on the Committee’s latest stance on the monetary policy of the year.

Europe

As it seemed that the COVID-19 epidemic was getting under control, European stock markets followed the global markets and rebounded, German stocks even closed at a record high. Over the past 5 days ending Thursday, the German DAX rose 1.26%, the French CAC was up 0.91%, while the FTSE 100 fell 0.7% as the Sterling strengthened. The UK Finance Minister Sajid Javid resigned in a surprising announcement, market expects that government spending may increase after the replacement, and the Pound rose accordingly. As for the European economic outlook, the European Commission expects that the European economy will stay on the weak side, and further lowered Italy’s economic growth forecast in 2020 from 0.4% to 0.3%. Eurozone and UK January inflation data will be released next week.

China

The China and Hong Kong stock markets continued their recovery over the week, The HSI rose 1.5%, while the CSI 300 Index was up by 2.25%. Earlier reports said that Zhong Nanshan, the high-level expert group leader of the Chinese National Health Commission, expected that the new coronavirus epidemic to peak this month and end around April. The market continued to digest the epidemic news, and partially recovered from the selloff in late January. China announced the inflation data for January earlier in the week, the CPI accelerated to 5.4% YoY, higher than market expectations and previous values of 4.9% and 4.5%. In particular, pork prices rose 116.0%. The high inflation has drawn market attention to its impact on future monetary policy. Next week, China will announce the RMB Loan Prime Rate (LPR). The market expects the one-year LPR to reduce 10 pips to 4.05%.

• Recent activities include : Harris Fraser held a Press Conference on “2020 Global Investment Market Outlook”, Attended Bloomberg Businessweek/Chinese Edition Top Fund Awards 2019
• Columns, media interview and online channels : “TVB News”,“TVB Big Big VIP”, “Now FINTERVIEW”, “iCable Finance”,“iCable News”, “Capital”, “SingTao Newspaper”, “Sing Tao Investment Weekly”, “Headlines News” , “ET Net”,“OrangeNews”, “Quamnet” and online videos produced by Harris Fraser Group. (including but not limited to the above)

United States 

Although the spread of the new pneumonia epidemic has not subsided, US stocks hit a new high on Thursday. As of Thursday, the S & P 500 Index has rebounded 3.7% this week. U.S. stocks hit another record high, on the one hand because of the stable quarterly results of U.S. stocks, and on the other, because the market believes that global central banks will be able to increase monetary easing again. Based on the published 316 companies of S&P500 index, the ratio of profit beating market expectations has remained at a high level of 75%, reflecting that companies are not overly affected by the expected economic slowdown. In terms of industry classification, the ratio of technology sector to outperform expectations was the highest, close to 95%; followed by consumer goods sector, 89%, reflecting that the consumer market is still good. After the US Senate vote, the allegations about Trump's impeachment were not established. The United States will release the January consumer price index, as well as retail sales and Michigan market sentiment data next week.

Europe

As of the past 5 days on Thursday, global stock markets have generally risen, and European stock markets are no exception. The British, French, and German stock markets rose by 1.7%, 2.8%, and 3.2%, respectively. While the market still believes that central banks will launch stimulus measures again, European Central Bank President Lagarde said this week that the central bank has less room to deal with global threats, or there is limited options to further strengthening monetary easing measures. The final Markit Eurozone manufacturing PMI announced in January this week was 47.9, slightly better than the previous value and expectations, but the year-on-year growth in retail sales slowed to 1.3% in December and the data was 2.2% in November. Next week, the Eurozone will announce GDP in the fourth quarter of last year, and the market is expected to increase by 1% year-on-year, unchanged from previous values.

China

In the Chinese and Hong Kong markets, although the mainland stock market fell sharply on the first day of opening on Monday, it began to rebound after opening lower on Tuesday and then rose for four consecutive days to make up for losses these days. Hong Kong stocks also to above 27,000 points this week. The State Department announced on Thursday that it will reduce tariffs on approximately $ 75 billion of US imports originating next Friday. In addition, the executive meeting of the State Council also stated that another batch of fiscal, tax and financial policies to support the economy will be introduced, and this news has supported the market. China will announce the consumer price index for January next week, and the market is expected to grow to 4.9% year-on-year.

• Recent activities include : Harris Fraser held a Press Conference on “2020 Global Investment Market Outlook”, Attended Bloomberg Businessweek/Chinese Edition Top Fund Awards 2019
• Columns, media interview and online channels : “TVB News”,“TVB Big Big VIP”, “Now FINTERVIEW”, “iCable Finance” “iCable News”, “Capital”, “SingTao Newspaper”, “Sing Tao Investment Weekly”, “Headlines News” , “ET Net”,“OrangeNews”, “Quamnet” and online videos produced by Harris Fraser Group. (including but not limited to the above)