Dear Clients,
I am writing to provide you with an update on how we are navigating through the current uncertainties surrounding COVID-19 and its impact on the economy and capital markets. While news about COVID-19 is disconcerting, the reality is that the underlying health risk and mortality rate associated with this outbreak is low relative to other disease outbreaks in the post-World War II era. The “Asian Flu” (H2N2) pandemic of 1957 resulted in 1.1m estimated deaths worldwide (116,000 in the US)1, the “Hong Kong Flu” (H3N2) pandemic of 1968 resulted in 1m estimated deaths worldwide (100,000 in the US)2 and the “Swine Flu” (H1N1) pandemic of 2009 resulted in 150,000-575,000 estimated deaths worldwide (12,500 in the US)3. In all of these cases, there was a short term negative impact on economic activity. However, the economic recoveries that followed, particularly in 2009 and 1958, were very strong.
This time round, as a result of containment efforts in China, followed by other Asian countries, and now even in Italy, the US and other parts of the world, travel and consumption activity has slowed dramatically and sizable disruptions have occurred in the global manufacturing supply chain. Without a doubt, global economic activity has been meaningfully impacted. That said, we expect that in time, business and consumption activity will rebound sharply and return to normal just as it always has after each health crisis of the past. At the early stages of the current COVID-19 crisis, media attention and questions about the unknown have gripped the public with fear and uncertainty. However, in due course, media attention will move on to new topics of interest and the general public will move on with the implicit understanding that uncertainties abound yet life has to go on. Past examples of this include the temporary slowdown of travel to places that have experienced terrorist attacks, followed by a resumption of normal activity in due course.
Having had 25 years of investing experience, I have lived through numerous market crises and shocks, and countless more scares. At the outset of each negative event, it is hard to predict the timing and degree to which markets or equity prices will retreat. Only in hindsight do the exact movements of markets become apparent. However, over time, I have developed a strong confidence in our strategy of owning well-positioned companies with superior profit potential in industries that are buoyed by long term, secular growth. In challenging times, these companies tend to weather the storm the best on account of their strong balance sheet, attractive market positioning and pricing power. This time will be no different. As we consider the strong fundamentals and attractive valuations underpinning each of your portfolio holdings, we feel very positive about the longer term return potential of your portfolio. Of course, we will continue to assess and evaluate, making changes where helpful and necessary.
If you have any questions, please do not hesitate to get in touch with me or any member of my team.
Sincerely,
Woon Ai on behalf of Woon Ai Tsang Wealth Management Group
