Citi Wealth Insights

A-shares have outperformed H-shares and Citi analysts believe this is due to more sensitivity of A-shares than H-shares to the government stimulus package to facilitate work resumption and economic recovery in China. Citi analysts think this outperformance is likely to persist in March.

While COVID-19 may disrupt supply chains for 5G (Fifth generation) smartphones in Q1, it has not derailed 5G smartphone demand in China. 2020 looks to be a pivotal year for Asia driven by faster penetration rates, more commercial launches and wider range of 5G application uses.

Policymakers in Asia have taken steps to support growth amid the virus outbreak and Citi analysts forecast global GDP of 2.5% in 2020 (revised down from 2.7% previously).

Will China’s economy be able to recover quickly like in 2003? Back in 2003, China’s economic growth fell from 12% QoQ annualized in 1Q to 3.5% in 2Q during the depth of the SARS crisis, but snapped back to 16% in 3Q.

Although China is now a larger economy and growing more slowly than during SARS, the economic drag resulting from the coronavirus is likely to be concentrated in Q1.

The World Health Organization has declared a health emergency over the novel coronavirus. Economic impact is likely to be negative in China, but temporary and largely concentrated in Q1 given drastic policy intervention to prevent the spread of the virus. Headline risk may continue in coming weeks.