Asia's economic resilience remains strong amid the coronavirus pandemic, according to a Credit Suisse strategist.
“I think clearly Asia is going to be resilient in the face of a second wave in developed markets in the West,” said Dan Fineman, co-head of equity strategy for Asia Pacific at the Swiss bank.
Fineman's statement comes as the US and Europe face a surge of coronavirus outbreaks.
“We need to look at the shift in consumption patterns that has occurred in the West since the Covid pandemic began. Although services spending has cratered in a number of countries as the pandemic hit, we’ve seen a shift of consumption patterns away from services towards goods — and that has enabled Asian exports to improve in recent months,” he said.
“As long as that shift in consumption patterns in the West continues away from services towards goods, actually the damage to Asia from a second wave in the West might be quite limited,” he said during an interview on CNBC’s “Street Signs Asia."
He noted countries that are worth investing in due to their success in managing the pandemic, such as South Korea, which he describes as a “top pick.”
“They’ve handled the pandemic quite well, and they don’t really have much of a domestic problem as far as the pandemic is concerned,” the analyst noted, pointing out the improvement in the outlook for the country’s export sector.
Fineman also commended countries such as Australia and Singapore, which showed “relatively low risk on the pandemic.”
He explained: “We would be looking to rotate into the higher risk, harder hit economies, places like say Hong Kong or Thailand, which have suffered more from the pandemic – if we get good news on vaccine phase three trials.”
What IMF says about Asia's economic resilience
Unlike Fineman, who believes Asia's economic resilience is strong, the International Monetary Fund (IMF) says Asia’s economy will shrink more this year due to the slowdown in several markets.
The organization said Asia could shrink by 2.2% in 2020. This is considered worse than the fund’s June prediction for a 1.6% contraction and does not reflect the IMF’s decision to revise upward the global economic forecast.
According to its latest Regional Economic Outlook report for Asia and Pacific, the downgrade for Asia’s economy “reflects a sharper contraction, notably in India, the Philippines, and Malaysia.” Moreover, India and the Philippines experienced a “particularly sharp” drop in economic activity in the second quarter, “given the continued rise in virus cases and extended lockdowns.”
Economic forecast per country
IMF’s data suggest that India could fall by 10.3% in the fiscal year ending March 31, 2021, while the Philippine economy could contract 8.3% in the calendar year 2020, much more than the predicted 3.6% contraction in June.
Malaysia is predicted to shrink by 6% this year, worse than the June forecast of a 3.8% contraction.
Meanwhile, China is one of the few Asian economies that would experience growth this year. The IMF pointed out that China’s economic activity in the region is moving at “multiple speeds,” with the country leading the recovery.
“After hitting a trough in February 2020, China’s growth received a boost from infrastructure, real estate investment, and a surge in exports, mainly of medical and protective equipment, as well as work-from-home-related electronics,” the IMF said in its report.
“This is being followed by a gradual recovery in private non-housing investment and consumption.”
