Tong’s portfolio: Domestic consumption and households demonstrate resilience

The Covid-19 pandemic has wreaked havoc on global economies, which may take some time to fully recover, what with the recent resurgence in new cases that has forced a slowdown in the reopening of the economy in many countries, including Malaysia.

Malaysia’s GDP contracted 17.1% y-o-y in 2Q2020, far worse than the 11.2% drop in 4Q1998 at the peak of the Asian financial crisis. The sombre data is not surprising given that all non- essential activities were forced to shut down while those deemed essential were only allowed to operate at well below capacity. The majority of businesses are still running at subpar capacity.

There is no question that many of the headlines are very worrying. However, the actual statistics are not as bleak as these headlines may suggest. In this issue, and over the next couple of weeks, we will share the many silver linings in the country’s most recently published data.

The picture we paint for Malaysia in fact applies to the rest of the world. The average consumer, globally, has been remarkably resilient in the face of the huge exogenous shock that is the Covid-19 pandemic. While one could argue that this is due to aggressive expansionary policies, such as generous cash handouts, the fact remains that the global economic situation is holding up better than originally feared.

To be sure, the situation is still fluid but we believe hard facts give the most objective picture of the state of the nation. It serves no one any good to succumb to overly negative sentiment, which is headlines-driven and may well be biased. Negativity could be self- fulfilling — and dangerous. As we wrote last week, we have to learn to live with Covid- 19.

The Global Portfolio was up again for the week ended Oct 15, gaining another 1.7% in line with the more positive sentiment for the broader market. Last week’s gains boosted total portfolio returns to 38.2% since inception. This portfolio continues to outperform the benchmark MSCI World Net Return index, which is up by 22.9% over the same period.

Technology stocks fared comparatively better than cyclicals over the past one week. Alphabet, Qualcomm and Microsoft were the biggest gainers, up by between 5.3% and 7.1%. At the other end, Bank of America was down 5.1%, while Rio Tinto also ended marginally lower.