Analyst predicts deep global recession in the short-term

Business | 7 Apr 2020 1:36 pm

The global economy is headed for a deep recession in the short-term, due to the widespread lockdowns of cities, an analyst says.

But, Hou Wey Fook, chief investment officer of consumer banking group and wealth management at DBS Bank,  does not see a prolonged recession “because of the very aggressive policy actions by central banks and governments. 

“Over a period of six to 12 months, we do see slow to moderate growth.''

He suggested a double barbell strategy -- buy income-generating assets at one end of the portfolio such as real estate investment trusts, BB and BBB-rated bonds, and large Chinese banks, and buy  “secular growth winners” on the other end of the portfolio, such as themes related to e-commerce, health care, and semiconductors.

“Corporate bond spreads can actually narrow over that of government bonds. In other words, we think there is value in credits. We like in particular BB and BBB bonds because spreads can actually narrow in a period of low moderate growth,” he said.

“We particularly like Asia high yield because it trades cheaper than investment grade bonds in Asia. And if you compare high yield of Asia versus that of other high yield markets, we also think that Asian high yield is very attractive from a valuation perspective,” Hou said.

 

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