Early in the Covid-19 crisis we wrote that the silver lining might lie in Chinese equity markets. Our view then was that the huge liquidity injection by the Chinese government would more than offset the transitory economic impact of coronavirus.

Low cost debt issuance for the purpose of ‘epidemic prevention and control’ efforts has raised over $34 billion over the month of February at low interest rates.

Over 150 companies in all industries have raised this capital which can obviously be used for a broad range of purposes.

While markets globally have had a rough ride over the past few weeks, with the S&P 500 down over 10% since its late February highs, China A-shares in US$ are down approximately 2.50%.  

We believe that taking a long-term approach in volatile markets is best.  We see that some of the short term out-performance in China can possibly be attributed to the quick fiscal and monetary action taken by China in the wake of the coronavirus epidemic.  We continue to believe that the liquidity injected into businesses will play through to more positive relative returns from Chinese equities over 2020.

End notes
China Opens a Coronavirus Bond Spigot WSJ – https://markets.cmail19.com/t/ViewEmail/d/7E0361F2708EC8232540EF23F30FEDED/F7CC4095AE63A2A6C06B463AA70A4F2C
by  Gavin Ezekowitz

Photo: Google