Author's Note: The below think piece is from our Feb 2020 publication for clients. Hope that you enjoyed reading it as much as they did (probably not!). Feel free to comment below!
Clearwater Capital is an asset management team based in Singapore that is Registered Fund Management Company regulated under the Monetary Authority of Singapore. Clearwater specializes in creating External Asset Management solutions for clients as well as developing our own Funds for external investors. Our investment philosophy is based on independent thinking, seeking profit through active management. We are presently launching our Creedence 1 Fund which targets to close in Q2 2020. This is an abridged version of Thesis Thinking piece that we have done for H1 2020. All enquiries can be directed to alexanderphua@clearwatercapital.com.sg Feb 2020: PANDEMIC AND PANDEMONIUM At the time of writing, the COVID-19 virus has now blown out globally. More than 38 countries have reported the sickness and excess of 2,800 deaths attributed. Global economies are bracing for a reckoning not seen since the 2008 Great Financial Crisis. Serious concerns about supply chains, tourism economies, and global trade and loan obligations are being considered as the policy makers try to fight these multiple fires concurrently. But before this outbreak, there were already deep concerns about the Trade War, Hong Kong and slow down of business conditions in China and of course Brexit. Our most common questions from clients are, what next and what should we do? We shall confine our analysis to North Asia, particularly China. At Clearwater, we carry these deep concerns. The global economy will be in peril. No question about it. This illness has already hammered China and at the writing, is blooming uncontrolled in Japan and Korea. The North Asian theatre accounts for about 40% of the global economy. SARS in 2003 was calculated to cost China $40billion, we estimate this hit to be within $500billion to $600billion. That figure has no projections yet for Korea and Japan. This will impact global demand for goods & services, global production from cars to hairdryers; even services will take an unprecedented hit, tourism and air travel are fully exposed (almost every country relies on tourists from North Asia). But our analysis asks, what will happen after that? We believe that it will end where it began. We believe 100%, the Government of China will beat this challenge. They have the political will and the ability to do so. They appear very cognizant that this is a problem akin to war and are taking the same approach. We believe that when this challenge enters its late stage and the government can turn its attention back the business of running the country, the PBOC will resort to a method that has worked for the same last economic crisis in the USA, Quantitative Easing. We believe that they will inject more capital into their economy than has ever been done to kick start their economy after this crisis, we estimate that PBOC will unleash at the first round no less than $800billion in near direct cash injections into Financial Institutions and direct their State Apparatus into putting efforts to ensure that should the next crisis like this unfurl, they will be better prepared and even more capable to handle it. It would be logical that the areas that would see the first rounds of this state backed investment would be in
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