Question

Please review the global and Chinese credit market in 2019 and the first three months in 2020 especially the impact of COVID-19, then provide your market outlook for the rest of 2020.

Answer 1

Global Credit Market : In the first 6 months of 2019 Global credit market posted strong performance likely due to increasingly accomdative monetary policies and growing geopolitical synergies and equal risk powered by marginal growth . Easier central bank policy helps stabalize decelerating growth and inflation .

However credit fundamentals remained solid with controlled leverage with valuations at steady fair levels in a low yield globally supported credit market , most central banks feared of a global downturn in growth during the second half with subdued returns and the resut was as anticipated with continuing fears of COVID 19

Chinese credit market : Chinese bond market is currently the third largest in the world with a market capitalisation of 12 Trillion dollars . Total inflows into the Chinese bond market in 2018 rose to 77 billion dollars with a three-fold increase from 2016 followed by attractive yields, improved market access . Also from April 2019, the Bloomberg Barclays Global Aggregate Index started including China Government Bonds (CGB) constituting 5-6 % of index exposure , and inflows worth 135 Billion Dollars are expected to reach china bond market in coming years directly from the investors .

Impact of COVID 19 : Forced lockdown , Movement of goods internally and extremely have completely stopped . Also the entire globe is effected with this pandemic virus and day by day the numbers are increasing causing threats that the lockdowns are expected to be extended till JULY 2020 with is a negative sign for the global markets. The economy to resume will hugely depend on how the countries control this virus and overlift it at the earliest . Because of this the global exports imports have stopped , Global tourism & travel industry is at the point of blinkage, Airline industry , Hotels industry , real estate and infrastructure companies with high debts are severally stressed due to this pendamic . Revenues of governmnet have fallen to all time low due to restricted business and fall in revenue , also pressuring the government to come up with stimulus package to support economy .

Outlook for 2020 : Following will the problems that shall arise

1. High inflation due to disruption in supply .

2. More defaults by institutions , corporates due to liquidity issue .

3. Insecurity among employees due to job cuts / retrenchment .

4. Less borrowing power among people thereby curbing domestic consumption .

5. Less / conservative discreationary spending among people like gold , tours , travel , hotels etc.