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By Tom Westbrook and Elizabeth Howcroft
SYDNEY / LONDON (Reuters) – Investors who expect an impending COVID-19 vaccine are starting to buy bank and industrial stocks in anticipation of a shattering return in consumer confidence, though many remain leery of the risks in areas ravaged by the pandemic.
Developing some kind of preventive medicine is seen as the best chance to stop the coronavirus, which has killed 1.2 million people and is the main problem for fund managers considering the next major change in financial markets. .
As the hype around the U.S. election wanes, investors are now bracing for some good news on vaccines, which they say is a matter of when, not if.
“This is going to be absolutely huge,” said Stuart Oakley, head of spot currency trading at Nomura in London. “If we get a vaccine, we’re going to see all of this pent-up demand come out.”
Of the 45 or so vaccines currently in human trials, those from Pfizer
Investors are looking beyond an expected “rally of excitement” and looking for long term beneficiaries and short selling opportunities.
“What we have done is give ourselves some option for a recovery trade, or a vaccine trade, by having some exposure to financials,” said Binay Chandgothia, Hong Kong-based portfolio manager at Principal. Global Investors.
Banks benefit from increased economic activity and would be helped if bond yields rise, he said, adding that he had increased exposure to small growth-sensitive companies and would buy stocks in Singapore and in Hong Kong if trade and travel resumed.
Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management in Wisconsin, said industrials offered wide exposure to a rebound in confidence in areas ranging from construction products to aviation.
Deutsche Bank runs a “vaccine basket” of Singapore dollars and Thai baht, seen benefiting from increased trade and tourism, against the Philippine peso, which is being weighed down by rising imports.
Financial stocks <.dMIWO0FN00PUS> and industries <.MIWO0IN00PUS> gained with the broader market this month, but lagged around 5% behind global equities <.MIWO00000PUS> this year. The baht has also recently jumped against the peso
THREAD THE NEEDLE
Investors also set up short positions.
Shinji Naito of SPARX Asset Management in Japan, which has $ 12 billion under management, hopes a vaccine could trigger a gain through shorts on pandemic-inflated stocks like some tech companies while helping with investments long such as real estate agent Tokyo Tatemono <8804. T>.
Dave Wang, portfolio manager at Nuvest Capital in Singapore, said long-short pairs could gain from what is likely to be a patchy recovery.
For example, airports, which charge by plane regardless of their load, may outperform airlines hit by low clientelism and rising fuel costs.
Of course, not everyone is looking for a piece of the action amid questions about the timing, effectiveness and distribution of any remaining vaccine.
“It’s better to be a little too late than too early,” said Hugh Dive, chief investment officer at Atlas Funds Management in Sydney, noting that delays would leave companies under pressure to raise more money quickly.
Others, however, believe it is now safe to bet on a global rebound, which a vaccine would stimulate.
“I think there are two different jobs,” said Sean Taylor, director of investments in Asia for German fund manager DWS. “A vaccine trade and a cyclical trade. I position myself more in the cyclicals,” he said. “If we got much more credible data on vaccines, I would add services.”
(Reporting by Tom Westbrook in Singapore and Elizabeth Howcroft in London. Editing by Vidya Ranganathan and Sam Holmes)
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