How will the ASX look post COVID-19

  • May 09, 2020 AEST
  • Team Kalkine
How will the ASX look post COVID-19

Australia making headway out of the crisis has rekindled the economic aspirations which appeared to be saddled by the heavy burden of Covid-19.The echoes of the positive sentiments are getting evident on the stock market front with the business scenario picking up the momentum. As the Australian beaches are slowly reviving back to their old glory, the economy keenly awaits the full bloom in its gradual transition.

Although the nation is eager to shirk the shackles of restrictions, the dilemma yet persists on the psychological ability of people to emerge out of the crisis ideology. The period of hardships is often known to engrave impacts on people’s minds, which alters the course of their actions as the changes slowly get deep seeped in our cognitive and behavioural space. Psychology apart, even international circumstances would play a crucial role in reshaping the economic landscape in the country.

Covid-19 pandemic like the antagonist of the drama swears to crush the spirit of Australian economic momentum that for years has pushed the nation’s development. But have not we in the older versions found the economy steering its direction triumphantly when confronted with past similar unprecedented incidences. It pops the question on why we are placing bets on the rigidity of markets when resilience won the past crisis battles.

With so many intrinsic and external forces working all together amidst the wavering scenario, the focus remains on how all factors would play out.  Moreover, so on how the investor’s motivation would shape the future of the market. While the dilemma persists, let us see what the coming time holds for the stock market.

A Time Travel to a past crisis with present Resources

The future movement is often gauged through the lenses of the past. The previous financial crises from the Great Depression of 1932 to the Recession of 2007-2008 have demonstrated that the economy is vulnerable to uncertainties and unprecedented mishaps. Nevertheless, the series of economic hardships also taught the resilience lies at the core of the recovery.

Looking at the Australian S&P/ASX 200 Price Index, the Australian economy that started dwindling around October 2007 picked up its momentum in February 2009. A period of over one year into the financial struggle may increase the present financial worries of the investors.

 

 

However, looking into the primary cause of the Great Recession indicates the bursting of the housing bubble contributed towards the mortgage crisis of 2007-2008. The household debt-to-income ratio in Australia has been particularly high, rising from about 70% at the start of 1990s. At the time during the recession, the ratio was around 160% which severely exposed the country to the financial distress.

 

Source: ABA; ARPA; RBA

 

Fast forward to the current scenario; the present situation is created owing to the pandemic-led restrictions. Contradictory to the previous circumstances, the country lies at an advantageous position compared to the rest of the world due to declining infection rate and flattening Covid-19 curve. It promises that Australian businesses would be soon back into operations.

The technological advantage further enhances the chances of economic revival. The businesses during lockdown were able to swiftly modify their business models owing to the presence of technological innovations. It facilitated many companies to stay into operations through the adoption of cloud software and digital platforms. The innovative digital tools improve the prospects of quicker recovery of stocks on the Stock Market.

A Glimpse at the Prospective Industrial Performance

The uncertainties and distress created by the pandemic outburst were evident through the long queues outside and empty shelves inside the supermarkets. The lockdown announcements sent the Aussies to panic buying to stockpile the necessary supplies. The changing market scenario is the reflection of the fear and aspirations associated with the different sectors.

Let us look at the stock market prospects of some of the major industries which remained under investor’s radar during the lockdown.

Tourism Industry

The travel bans and close of the international and inter-state borders drastically hit the travel industry. The travel sector witnessed heavy revenue losses with a considerable proportion of employees laid-off. The infection widespread on the Australian Cruises further worsened the fear of the investors.

The travel stocks have witnessed record low performance in the past few months. The phased reopening of the Australian economy is expected to promote domestic tourism for the time being. However, international travel primarily depends upon the global pandemic situation, which yet awaits the significant improvements and vaccine development. 

Retail Sector

Skyrocketing grocery sales lead to higher investor activities in the retail sector. Australian retail industry rose by 8.5% in March 2020, as per the data from the Australian Bureau of Statistics. The food retailing and household goods remained the high revenue grossing areas for the retail sector.

ASIC regarding the higher activities in the retail sector warned the ordinary investors of the high-risk associated with the CFDs. On the other hand, the reopening of the Australian economy is expected to bring back different areas such as clothing and accessory retailing, cafes, restaurants into the investor’s radar.

Tech Space

The technology sector often regarded for their risky performed substantially well due to its role in supporting the other business areas. The growth of e-commerce, cloud-based technologies and remote working picked were some of the major trends during the lockdown

The tech-based platforms providing innovative solutions offers high prospects, which could prompt the investor’s sentiments in similar stocks.

Health Care

The healthcare remained at the forefront in the fight against Covid-19 pandemic. The rise of the sanitisers and Personal protective equipment like gloves, masks, etc. surged with the steep increase in the global infection rate. However, the pharmacies encountered a decline in retail prescription sales during the lockdown.

The interest in the incorporation of robotics and Artificial Intelligence as the component of the healthcare sector has piqued considerably. The future of the healthcare stocks may expectantly depend on how successfully the healthcare players steer their offerings in the innovative and demanding landscape.

Bottom Line

The cherry-picking of the stocks has picked up momentum with the investors trying to balance between the volatility and stability. As the investor’s targets the value investments, the blue chips stocks and dividend stocks are also gaining popularity. At the same time, the substantial price bargains and conservative epidemic ideology along with the optimism primarily dominates the investors, which would ASX movement in the upcoming time.

 


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