Pandemic casts pall over year of great expectations

Business | Andrew Wong 28 Dec 2020

Before we look ahead to 2021, let's review our six predictions at the start of 2020.

First, it was pointed out US stocks weren't cheap but that the S&P 500 was expected to perform like in 2000 and not slip until PE ratios were close to 28 times, which means there was 15 percent upside.

By Thursday, it was up 14.62 percent but has yet to peak, and due to Covid-19 factors, the PE should break through 30 times.

But as the Federal Reserve has shown no intention of tightening monetary policy in the short term, so it is difficult to predict when US stocks will peak.

Second, only Hong Kong stocks were anticipated to have a crazy rally, so would investors have the opportunity to cash out and the stocks have the potential to fall back.

SAR stocks were expected to outperform by more than 20 percent in 2020.

The pandemic and the SAR being a Sino-US battleground raised fears over our financial hub status.

Therefore, the Hang Seng should fall by more than 6 percent in this runup to the end of the year. That is still slight under the influence of external worries and disasters.

It is correct to think that investors still haven't cashed out so Hong Kong stocks will not suffer a crash. The surprises that did not show up in 2020 might happen in 2021.

Third, expectations were for regional markets to reverse the weaknesses of 2019.

The results are mixed: South Korea gained over 27 percent for 2020; Vietnam gained 12 percent; Singapore lost 11 percent; the Philippines lost over 7 percent.

Korea and Vietnam did well because of signs of recovery in the mobile phone market, not because of heavy capital inflows.

However, Singapore rose nearly 15 percent and Manila over 23 percent in this quarter. The MSCI emerging Asia index rose more than 26 percent in the second half, so the money is really back in the stock market.It was delayed until the second half so 2021 could still continue in this vein.

Fourth, looser monetary policy was expected to continue and gold was seen as high as US$1,800 (HK$14,040), and the real peak was expected only in 2021.

The loosening was off the charts due to the pandemic, while gold broke through US$2,000 more than once. The rise should continue, and 2021 should see new peaks.

Fifth, the Australian dollar was expected to rise in the first half, but then the pandemic came. Although the year saw a nearly 5 percent rise, many had a cold sweat when they saw panic selling in February and March.

But it should enjoy a smooth recovery in 2021 as resource prices have begun to stir.

As for the yen, the advice was to hoard yen when it rose to 113 or above.

The pandemic put paid to this advice.

Sixth, the trade war was expected to enter a Cold War phase. It turned out to be so only because of Covid-19.

Hong Kong really became the bargaining chip in this war.

The only fortunate thing is that the stock market has temporarily decoupled, so the Sino-US factor will not affect the HSI in the short term.

Andrew Wong is chairman and CEO of

Anli Securities

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