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Asian Market Advantage Under Question in a World With a Vaccine

Asian Market Advantage Under Question in a World With a Vaccine

Asia’s successful management of Covid-19 may end up damping its relative appeal to investors in a world with a coronavirus vaccine.

With much of the region having already successfully emerged from lockdowns, the MSCI Asia Pacific Index only managed a 0.5% climb through lunchtime Tuesday, in the aftermath of a bullish progress report from Pfizer Inc. and BioNTech SE on a potential vaccine. That was a far cry from Monday’s 4% rally in Europe’s Stoxx 600 Index and lagged the 1.2% rise in the S&P 500 Index.

“On a regional basis, there is a strong case to be made that the U.S. comes out as the relative outperformer if the vaccine proves successful,” said Sue Trinh, managing director for global macro strategy at Manulife Investment Management in Hong Kong. Themes that are independent of vaccine development, including record low interest rates, debt monetization and a reversal of globalization, are likely to produce much more divergent trends in Asia, she said.

Asian Market Advantage Under Question in a World With a Vaccine

While approval of a coronavirus vaccine has the potential to boost stocks worldwide, the biggest relief rally is likely to come in regions suffering most from the coronavirus spread and measures to stop it. The likes of China, Taiwan, South Korea and Vietnam have already shown an ability to control the pandemic and Asia isn’t yet seeing a resurgence in the virus like the U.S. and Europe.

“Markets in north Asia which have handled Covid-19 relatively well, both from a health and economic perspective, are likely to see less benefit from a vaccine,” said Herald Van Der Linde, head of equity strategy for Asia-Pacific at HSBC Holdings Plc.

Still, within the region the vaccine breakthrough could help reinforce a rotation toward the more cyclical South Asian markets away from the “tech rich” East, said Frank Benzimra, head of Asia equity strategy at Societe Generale SA.

“The fact that China, Korea and Taiwan are underperforming is not especially surprising,” he said.

©2020 Bloomberg L.P.