Paradigm Shift: Looking Beyond The Covid-19 Pandemic [Part 2]
This is a continuation and part 2 to the series “Paradigm Shift: Looking Beyond The Covid-19 Pandemic”. Click here to read part 1 of the story.
In the following section, we highlight some sectoral themes that we think would be favourable in a post-Covid-19 world. The list is of no particular order of rank.
|Defense||N.A.||Heightening geopolitical tensions would spur defense spending as great powers compete to expand influence by hard power.|
|Financials||Payment-processing||It is the return of low net interest margins era for banks. But cheap money will mean less incentives to save for consumers and “revenge spending” bodes well for payment processors like Visa, Mastercard, Paypal and Alibaba’s Alipay etc.|
|Medical||Biopharmaceutical||Big Pharma gets some respite for charging high drug prices. Future government regulations to prevent exploitations would likely to be complemented with supportive policies that continue to incentivize Biopharma companies to bring new drugs to the market.
Companies with emerging technologies that translate to faster development of experimental drugs (such as Moderna) to garner even greater attention from the market.
Medical equipment &
|The current pandemic has exposed the long-term structural undersupply of healthcare services globally. Governments will see a dire need to shift gear and create excess capacity to deal with future pandemics.
Up-and-coming healthcare services such as digital diagnosis will become increasingly relevant and is key to easing some burden off physical capacities. Companies in this space, such as Teladoc, has hit record highs during current crisis. Locally, Singapore Medical Group is one of the early movers in the telemedicine space.
Medical equipment/supplies makers should continue to see higher demand from restocking and increasing healthcare capacities. Medical robotics will become more prevalent in driving productivity. Johnson & Johnson, Intuitive Surgical, Medtronic and Globus Medical are some examples of companies along this theme. On the local front, we have Top Glove, UG Healthcare and Riverstone that supply medical gloves.
|Consumer staples||Supermarkets||Consumer staples retailers that initially suffered from the emergence of e-Commerce, have evince that their brick-and-mortar model would be indispensable. That said, those thriving are also the ones that have built up online channels to complement their physical outlets.
It is of this reason why Walmart, Costco and Sheng Siong are some consumer staples retailers that rose to record highs during this period. Notably, Sheng Siong has posted record 1Q20 earnings, up by almost 50% on the back of elevated Covid-19 demand.
In next few quarters, Sheng Siong earnings may be further lifted by the government’s supportive measures such as enhanced property tax rebates for qualifying commercial properties which would bring in some cost savings, and grocery vouchers to qualifying households which would boost sales growth. Post-crisis, Sheng Siong stands to benefit from lower new lease costs.
|Particularly those producing processing or connectivity chips will be better positioned to continue benefitting from the secular semiconductor growth trend in the long-term.
Examples of technology providers: Nvidia, Intel, AMD, Qualcomm
|Software-as-a-Service||Mission-critical enterprise Software-as-a-Service (SaaS) providers will see higher dependency. Higher degree of experimenting with working offsite will give rise to collaborative software. Examples include: Microsoft, Zoom, Alphabet, DocuSign, Adobe, Salesforce
Cloud computing services, Microsoft, Amazon, Alphabet, Alibaba
|E-commerce||Closures of numerous brick-and-mortar retails stores during the lockdown gives a big push for adoption of
E-commerce. Examples are: Amazon, Alibaba, Pinduoduo, JD.com, Shopify.
Another tailwind for Chinese E-commerce players is the government’s drive for higher domestic spending.
|Cybersecurity||Increase in remote business activities will further elevate requirements for data security.|
New market paradigms triggered by geopolitics, are also at whims of fluid international dynamics. The sectoral themes and individual stocks mentioned above are by no means any solicitation to buy or invest. This article merely serves to provide some insights and opinions, of which investors can ponder about – beyond the Covid-19 Pandemic crisis.
This is part two of a two-part article. In the first part of the article, we offer some perspective to the paradigm shift from the Covid-19 pandemic. Click the link at the top of the page to view part 1 of the article.
This material and information herein is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation to invest in the fund(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. The information is subject to change at any time without notice. The value of the units and the income accruing to the units may fall or rise. You should read the relevant prospectus and the accompanying product highlights sheet (“PHS”) for disclosure of key features, key risks and other important information of the relevant fund (s) and obtain advice from a financial adviser (“FA”) before making a commitment to invest in the fund(s). In the event that you choose not to obtain advice from a FA, you should assess whether the fund(s) is/are suitable for you before proceeding to invest. A copy of the prospectus and PHS are available from PCM or any of its authorized distributors. Investments are subject to investment risks including the possible loss of the principal amount invested. Past performance is not necessarily indicative of the future or likely performance of the fund(s). There can be no assurance that investment objectives will be achieved. Any use of financial derivative instruments will be for hedging and/or for efficient portfolio management. Investments in the fund(s) managed by PCM are not obligations of, deposits in, or guaranteed by PCM or any of its affiliates. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the investments mentioned herein or related thereto. This publication and Information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The fund(s) is/are not offered to U.S. Persons. The regular dividend distributions, where applicable, are paid either out of income and/or capital, not guaranteed and are subject to PCM’s discretion. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value of the fund(s). Past payout yields (rates) and payments do not represent future payout yields (rates) and payments. Please refer to for more information in relation to the dividend distributions. The information provided herein is based on certain information, conditions and/or assumptions available as at the date of this publication that may be obtained, provided or compiled from public and/or third party sources which PCM has no reason to believe are unreliable; and may contain optimistic statements/opinions/views regarding future events or future financial performance of countries, markets or companies. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. You must make your own financial assessment of the relevance, accuracy and adequacy of the information in this material. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss or consequences arising whether directly or indirectly as a result of your acting based on the Information in this material. The information does not constitute, and should not be used as a substitute for, tax, legal or investment advice. The information should not be relied upon exclusively or as authoritative without further being subject to your own independent verification and exercise of judgement. This material has not been reviewed by The Monetary Authority of Singapore.