Investors bet vaccine sparks revival in beaten down stocks

In this news, we discuss the Investors bet vaccine sparks revival in beaten down stocks.

SYDNEY / LONDON (Reuters) – Investors who expect an impending COVID-19 vaccine are starting to buy bank and industrial stocks in anticipation of a shattering return in consumer confidence, though many remain leery of the risks in areas ravaged by the pandemic.

Developing some kind of preventative medicine is seen as the best chance to stop the coronavirus, which has killed 1.2 million people and is the main problem for fund managers considering the next major change in financial markets. .

As the hype around the U.S. election wanes, investors are now bracing for good news on vaccines, which they say is a matter of when, not if.

“It’s going to be absolutely huge,” said Stuart Oakley, head of currency trading at Nomura in London. “If we get a vaccine, we’re going to see all of this pent-up demand come out.”

Of the approximately 45 vaccines currently in human trials, those from Pfizer PFE.N and Moderna MRNA.O are considered likely to gain regulatory approval this year, with AstraZeneca AZN.L not far behind. .

Investors are looking beyond an expected “rally of excitement” and looking for longer term beneficiaries and short selling opportunities.

“What we have done is give ourselves some option for a trade-in, or a vaccine trade, by having some financial exposure,” said Binay Chandgothia, Hong Kong-based portfolio manager at Principal. Global Investors.

Banks benefit from increased economic activity and would be helped if bond yields rise, he said, adding that he had increased exposure to small growth-sensitive companies and would buy stocks in Singapore and in Hong Kong if trade and travel resumed.

Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management in Wisconsin, said manufacturers offered wide exposure to a rebound in confidence in areas ranging from construction products to aviation.

Deutsche Bank runs a “vaccine basket” of Singaporean dollars and Thai baht, benefiting from increased trade and tourism, against the Philippine peso, which is weighed down by rising imports.

Financials .dMIWO0FN00PUS and Industrials .MIWO0IN00PUS gained with the broader market this month, but are lagging around 5% behind global equities .MIWO00000PUS this year. The baht has also surged recently against the peso PHPTHB = R.

THREAD THE NEEDLE

Investors also set up short positions.

Shinji Naito of SPARX Asset Management in Japan, which has $ 12 billion under management, hopes a vaccine could trigger a gain through shorts on pandemic-inflated stocks like some tech companies while helping with investments long such as real estate agent Tokyo Tatemono 8804.T.

Dave Wang, a portfolio manager at Nuvest Capital in Singapore, said long-short pairs could gain from what is likely to be a patchy recovery.

For example, airports, which charge by plane regardless of their load, could outperform airlines hit by low clientelism and rising fuel costs.

Of course, not everyone is looking for a piece of the action amid questions about the timing, effectiveness and distribution of any remaining vaccine.

“It’s better to be a little too late than too early,” said Hugh Dive, investment director at Atlas Funds Management in Sydney, noting that delays would leave companies under pressure in need of raising more money quickly.

Others, however, believe it is now safe to bet on a global rebound, which a vaccine would stimulate.

“I think there are two different jobs,” said Sean Taylor, director of investments in Asia for German fund manager DWS. “A vaccine trade and a cyclical trade. I position myself more in the cyclicals ”, he declared. “If we got much more credible data on vaccines, I would add services.”

Reporting by Tom Westbrook in Singapore and Elizabeth Howcroft in London. Edited by Vidya Ranganathan and Sam Holmes

Original © Thomson Reuters

Originally posted 2020-11-08 21:36:12.

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