How do global banks assess Omicron risk? JPMorgan, Morgan Stanley and Credit Suisse see opportunity in ‘bump’ on road to market recovery
- Most likely scenario is a bump in the road to recovery, rather than derailing it, JPMorgan Asset Management executive says
- Morgan Stanley analysts expect further delays to borders reopening
The discovery of Omicron, the new Covid-19 strain, has brought a fresh wave of volatility to global equities, which have reacted with alarm to the WHO declaring it a “variant of concern” on Friday. News of the variant triggered heavy sell-offs over the weekend and has since erased roughly US$1 trillion off the value of global stocks.
Asian markets tumbled, taking cues from Wall Street as the Dow and S&P500 logged their biggest drops in months on Friday. Since then, about US$580 billion has been wiped out of Asian stocks, based on the MSCI Asia Pacific Index.
As investors fret over whether markets will take another beating from new Covid-19 variants, here are what global banks and fund managers have to say about the Omicron strain’s impact.
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What do we know about the new coronavirus variant Omicron?
JPMorgan: a bump in the road to recovery
“Investors for some months have been pricing in a smooth path to recovery and the Omicron variant poses a new challenge to this constructive view,” said Tai Hui, JPMorgan Asset Management’s Asia chief market strategist. Market pressure could persist until medical experts have a better understanding of the virus, he added.
Sectors that outperformed during the early stages of the pandemic, such as technology services and health care, have attracted investor interest again, compared with cyclical sectors that could once again come under pressure, Tai said. Meanwhile, a short-term rotation from risk assets including equities to safe-haven assets, such as government bonds, could continue, he added.
“The most likely scenario is a bump in the road to recovery, rather than derailing it,” Tai said, considering governments’ experience in dealing with outbreaks and scientists’ ability to alter current vaccines.