Dow Jones saved by healthcare stocks, China beats manufacturing expectations

Dow Jones saved by healthcare stocks, China beats manufacturing expectations

On Monday, the Dow Jones rallied over 600 points with a boost from the healthcare sector. China exceeded expectations from the recent results of their manufacturing Purchasing Manager Index (PMI).

Despite the extension of social distancing being implemented in the United States, Wall Street had a brief rally on Monday, putting healthcare on top.

The S&P healthcare sector went up as high as 6.47% with Johnson & Johnson and Abbot Laboratories going up 8% and 6.41% respectively. The government is currently funding these two companies for the implementation of a diagnostic test for COVID-19 as well as the creation of its coronavirus vaccine.

Aside from healthcare, the technology sector also rose more than 4% with Microsoft taking the lead, with their shares jumping to over 7%.

Other US investors looking at opportunities in China

Investors are currently looking at companies that will create a positive impact on the economy despite the coronavirus outbreak. Phil Blancato, CEO of Ladenburg Thalmann Asset Management in New York tells Reuters:

“You are looking for a way to re-enter the market on stocks that are going to give you an opportunity to participate […] You look at some of those and say there is an opportunity for me to buy good companies with strong balance sheets that on the other side of this should produce.”

Pinebridge Investments, a New York-based firm, is hitting all hands on deck with total assets under management of over US$101.3 billion as of the end of last year.

Michael Kelly, global head of multi-asset at Pinebridge, tells CNBC:

“We have recently boosted China A shares from a small single-digit starting position to a low double-digit weighting […] As a result of COVID-19, the West is now seeing plunging economics through at least (the second quarter), while the East, led by China, is already full of companies that are showing recovery.”

Aside from PineBridge, UBS Asset Management in late February launched a new Exchange-Traded Fund (ETF) that focuses on China’s stock market.

Kelvin Tay, regional chief investment officer at UBS Global Wealth Management, says he’s upbeat on China.

“An estimated 40% of MSCI China’s stocks are technology-related […] These sectors are far less vulnerable to the economic slowdown as a result of the COVID-19 pandemic. We expect the virus to have long-term implications in areas including US-China trade, global supply chains, digital infrastructure, and offline to online migration.”

He also adds that coal consumption and property sales are almost at 80%-90% of prior levels and the labor market is showing activity.

Chinese economists ‘optimistic’ but not complacent with recent readings

In recent news of China reporting an expansion of their manufacturing Purchasing Manager Index (PMI), investors in the West also consider flocking to China to find opportunities.

However, Chinese economists have divided opinions with the recent PMI readings.

Reuters analysts expected the PMI to come in at 46.0 however the official reports stated reading of 52.0. Qian Wang, Asia Pacific chief economist at Vanguard Investment Strategy, already expected this, telling CNBC:

“In February, the Chinese economy was at a full stop. It doesn’t take much to rise from such a low base.”

In contrast, Nomura economists report in a note on Tuesday that the average of the February and March manufacturing PMIs is only 43.9, indicating contraction.

They also viewed that the readings in March PMIs do not mean Beijing will be complacent and will continue to step up financial relief and stimulus in the coming weeks.

Featured image courtesy of PikRepo

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