The notable easing of the pandemic situation in North America and Europe suggests vaccines are highly effective in curbing the spread of Covid-19. And with the pandemic gradually coming under control, economic activities will pick up. The global economy is likely to rebound strongly in the latter half of the year. Nevertheless, inflation may remain high in the short term because supply may not be quick enough to catch up with rising demand.

Currently, many stock markets are stable. But asset prices will stay at a rather high level due to the impact of quantitative easing. Nonetheless, money will flow to markets where asset prices are relatively low. Investors should go with the flow and follow where the smart money goes.

Recently, things have apparently changed in stock markets in Asia Pacific in that these markets have become investors’ targets. When an outbreak emerged in Taiwan last month, the Taiwanese stock market fell sharply. Yet soon afterwards capital flew back to the island, and Taiwanese stocks bounced back from market lows. The Indian stock market has also experienced the same thing. Not only has the pandemic not led to a market collapse, but Sensex has picked up and risen to near historical highs in the past few weeks.

In Hong Kong, the stock market has gradually got stronger of late. One key factor has to do with the strong rebound of A-shares over the past few weeks. Meanwhile, support from mainland capital has also helped Hong Kong stocks pick up from market lows. In the last two trading days, the Hang Seng Index approached the 29,500-point mark. Given the stability of the A-share and foreign stock markets, the Hang Seng Index should stand a good chance of hitting the 30,000-point mark before the end of this month. But there is a precondition: old economy stocks HSBC Holdings (0005.HK) and AIA (1299.HK) need to perform well, or the Hong Kong stock market will continue to fluctuate.

(Kwan Cheuk-chiu, economist)

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