- Bears are focussing on the short-term uncertainties, while early signs of recovery from China could provide fuel for Bulls to get excited about
- State aid could boost industrial and healthcare stocks post-pandemic risk
- The Company announced positive annual results – topping AIC Global sector for the financial year
Zehrid Osmani, Portfolio Manager, Martin Currie Global Portfolio analyses the market reaction to the COVID-19 pandemic and the opportunities:
Bull and Bear battle
As people around the world try to make sense of the global pandemic, the markets are currently going through a healthy ‘Bull and Bear’ battle. The Bears are focussing on the short-term uncertainties, such as the sharp negative impact on economic activity and the need to significantly adjust earnings estimated downwards. They point to the fact that we are going through a period of profit warnings, which will continue and potentially accelerate over the next two quarters. Dividend policies are also at risk of being revised down, or all together being suspended.
But the next couple of quarters could also give us more visibility on the magnitude of earnings downgrades and potentially give us early signs of stabilisation in the economics who have come through the pandemic earlier. There have already been some encouraging early signs from China in the last week and if we continue to see indicators of recovery in Asia, that could provide fuel for the Bulls to get excited about the potential for a market recovery. We think markets will start to look through the earnings downgrade we are going through and the recessionary fears, towards a potential recovery in the next few quarters as we see further evidence of such stabilisation.
Post crisis opportunities
Focusing on the opportunities we see post pandemic crisis, firstly, we predict increased state involvement in economies generally being a big theme. Secondly, infrastructure plans are likely to accelerate, noticeably high-speed railway and 5G telecoms upgrades. Thirdly, healthcare infrastructure spend is likely to be high, in order for governments to better prepare for the next pandemic threat. Food safety standards are likely to increase, and there will a need for a global co-ordinated approach to monitoring future pandemic threats. We have therefore been looking at companies who are exposed to these increased spending plans, in particular in the industrial and healthcare sectors.
Annual Company results – top of AIC Global sector
The Company posted annual results [today] for the financial year ending 31 January 2020. They show that the share price total return was the highest in the AIC Global sector over the period.
Neil Gaskell, Chairman, Martin Currie Global Portfolio Trust, commented: “The Company delivered an exceptionally strong result for the year with a 30.4% share price return outperforming the benchmark by 13.3%.
The impact of Covid-19 has been felt by the Company, and the NAV per share fell in value between February and April, but by significantly less than the benchmark as its focus on strong balance sheets and sustainable business models has provided some downside protection.
At this stage it is not possible to forecast the duration or severity of the global downturn following the Covid-19 crash but it will undoubtedly test those businesses which are financially exposed and increase volatility in the stock markets at least in the short-term. Against this background, the Company’s focus on financially robust, well managed businesses with sustainable business models, makes it comparatively resilient to these challenges and able to continue delivering a strong competitive performance."
The annual report and accounts 2020 for Martin Currie Global Portfolio Trust are available on the Company’s website at www.martincurrieglobal.com
Regulatory information and risk warnings
Past performance is not a guide to future returns
The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the security transactions discussed here were or will prove to be profitable.
Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested.
Please note that, as the shares in investment trusts are traded on a stockmarket, the share price will fluctuate in accordance with supply and demand and may not reflect the value of underlying net asset value of the shares.
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