Fidelity International

Fidelity Pulse Survey: China will lead recovery from COVID-19 virus

20 March 2020

London, 19 March: Companies in China appear best placed to emerge soonest and with least damage from the global coronavirus pandemic, according to a pulse survey of 152 Fidelity International equity and fixed income analysts*.

Among those expecting the virus to lower earnings for the companies they cover, 85 per cent of Fidelity’s China analysts expect that hit to be contained to the first half of the year, compared to just 42 per cent of analysts covering other regions who expect the impact to extend into the second half.

And despite 87 per cent of Fidelity’s China analysts expecting the virus to damage profitability, the highest of any region, they expect the magnitude of that hit to be milder than other regions.

Fiona O’Neill, Deputy Head of Equity Research, Fidelity International comments: “Since China was the first country afflicted by the virus it seems logical it will recover the fastest. But the time taken to resume business activity in countries struggling to cope with the outbreak will also depend in large part on the containment measures taken by individual governments.

“The Chinese authorities’ decision to impose strict travel restrictions in affected areas relatively early in the outbreak seems to have ensured the country will face a broad-based shock to the system, but will recover relatively quickly and with less of an impact to earnings overall, as long as it doesn’t see a second wave of the virus.

“In the West, efforts have centred on slowing the spread but avoiding economic shutdowns for as long as possible. The difference between the approaches is difficult to predict at this stage”

Technology sector looks well placed to handle virus shock

One area of the market that looks better positioned than others to handle the virus shock is the technology sector. Fidelity’s analysts also expect the hit to earnings as a result of the virus outbreak to be shallower than other sectors.

Fiona O’Neill adds: “The technology sector has more recurring revenues that will mitigate liquidity concerns, while sub-sectors such as video games and remote working will see a boost as countries attempt to limit travel and social gathering.”

“Technology companies are also amongst the most prepared for the outbreak getting worse - there is already a culture of working remotely and of all the sectors it has the technology to do so.”

-Ends-

*The Fidelity Quarterly Sentiment Tracker for March 2020 features 185 responses from 152 analysts (some analysts cover more than one sector). The survey was conducted between 7 March and 12 March.

About Fidelity

Fidelity International offers investment solutions and services and retirement expertise to more than 2.4 million customers globally. As a privately-held, purpose-driven company with a 50-year heritage, we think generationally and invest for the long term. Operating in more than 25 countries and with $582 billion in total assets, our clients range from central banks, sovereign wealth funds, large corporates, financial institutions, insurers and wealth managers, to private individuals.

Our Workplace & Personal Financial Health business provides individuals, advisers and employers with access to world-class investment choices, third-party solutions, administration services and pension guidance. Together with our Investment Solutions & Services business, we invest $448 billion on behalf of our clients. By combining our asset management expertise with our solutions for workplace and personal investing, we work together to build better financial futures. Data as at 31 December 2019. Read more at fidelityinternational.com

Fidelity only offers information on products and services and does not provide investment advice based on individual circumstances, other than when specifically stipulated by an appropriately authorised firm, in a formal communication with the client.

Fidelity International refers to the group of companies which form the global investment management organisation that provides information on products and services in designated jurisdictions outside of North America. This communication is not directed at, and must not be acted upon by persons inside the United States and is otherwise only directed at persons residing in jurisdictions where the relevant funds are authorised for distribution or where no such authorisation is required.

Unless otherwise stated all products and services are provided by Fidelity International, and all views expressed are those of Fidelity International. Fidelity, Fidelity International, the Fidelity International logo and F symbol are registered trademarks of FIL Limited.

Investors should note that the views expressed may no longer be current and may have already been acted upon.

Issued by Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority.