Pandemic Crisis Sparks a Reshuffle of Asia’s Top Stocks

The coronavirus pandemic is accelerating the reshuffle in Asia’s stock market with those prospering in the health crisis surging to rank among the region’s leaders.

Here are some examples: factory-automation specialist Keyence Corp. briefly became Japan’s second-largest stock after Toyota Motor Corp, while biotechnology firm CSL Ltd. knocked out Commonwealth Bank of Australia as the benchmark leader Down Under. Online shopping and gaming firm Sea Ltd. surged to become the most-valuable company in Southeast Asia, and Korean drugmaker Celltrion Inc. marched into the nation’s top five ranking by market value.

And the list goes on.

To be fair, the stock market has already embraced technology and pharmaceutical shares that underpin global economic transformation. But it’s the coronavirus outbreak that’s putting the shift in a fast-forward mode: Factories have never faced such urgent need to replace humans with machines to keep production lines running. Shoppers are being forced to go online during lockdowns, bringing forward the demise of brick-and-mortar stores. Health-care equipment suppliers are suddenly flooded with orders.

64,534 in U.S.Most new cases today

-4% Change in MSCI World Index of global stocks since Wuhan lockdown, Jan. 23

-1.​137 Change in U.S. treasury bond yield since Wuhan lockdown, Jan. 23

4.​4% Global GDP Tracker (annualized), June


READ MORE: Stay-at-Home Stock Market Kept Investors Afloat: Matthew Winkler

With funds chasing companies that keep business and life going, these firms are growing bigger at a much faster pace globally. In the U.S., the technology-heavy Nasdaq 100 Index has outperformed the S&P 500 Index by about 23 percentage points this year. Top five tech names make up about 20% of the S&P gauge, the highest for any five members in more than 30 years.

“In the aftermath of most crises, higher quality companies tend to take market share from their competitors,” said Janet Tsang, investment specialist for emerging markets & Asia Pacific equities at JPMorgan Asset Management. “Simply put, the strong get stronger and the weak get weaker.”

The top five gainers in the benchmark this year through July 21 all benefited from Covid-19 -- two glove makers, a pair of health-care companies and an online education company, a contrast to the 2019 list which consisted of semiconductor producers and telecom-equipment makers.

The rise of pandemic beneficiaries is increasingly threatening market leaders in traditional businesses. Nine financial firms got booted from the top 100 Asian companies by market value this year, replaced by information technology, health care and industrial names.

Even in China, where financials still dominate one third of market value in its benchmark, liquor giant Kweichow Moutai Co. has dethroned Industrial & Commercial Bank of China Ltd. as the mainland’s biggest stock.

The two largest companies on the Asia benchmark -- Chinese Internet giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd. -- now have a combined market value of $1.3 trillion. That is more than the combined capitalization of the region’s 13 biggest banks.

Polarizing Earnings

The winners’ stock surge has been supported by earnings growth.

Top Glove Corp., the world’s largest glove maker and Asia’s top gainer this year, last month posted its strongest ever quarterly earnings results driven by sales generated on the back of the pandemic.

Meanwhile, airlines, retailers and and shopping-mall owners are struggling with shrinking demand. Hong Kong’s flagship carrier Cathay Pacific Airways Ltd. warned of a $1.3 billion first-half net loss, having flown less than 1% of its usual number of passengers in recent months. Its stock, which was removed from Hong Kong’s Hang Seng Index in 2017, plunged to lowest in almost two decades. Singapore landlord CapitaLand Ltd. and Chinese sportswear brand Anta Sports Products Ltd. have both forecast profits to slump.

Read: A Top Fund Manager Keeps Faith in Health Stocks in Second Half

The uncertain duration and nature of the pandemic is keeping investors on their toes. With cases rising again, cities like Hong Kong and Singapore have tightened measures to combat the spread. As of Wednesday, the virus has infected nearly 15 million people and caused more than 616,000 deaths.

“The fear of the virus will remain in the consumer psyche for the year to come,” said Stephen Innes, chief market strategist at Axicorp Ltd.. “It triggered a new wave of technological ingenuity that could even surpass the dotcom bubble frenzy.”

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