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Central bank help to virus-stricken economies would be opportunity to sell, says Exante Data

By Megan Davies
FILE PHOTO: The Bank of England is reflected in a puddle in the financial district in London

By Megan Davies

NEW YORK (Reuters) - Global central banks may ease market panic in the short-term with measures to combat economic stress caused by coronavirus, but the effectiveness of any intervention is likely to be limited and an opportunity to sell, according to macro advisory firm Exante Data.

    Exante Data’s comments came as world stock markets regained a measure of calm on Monday amid hopes for a raft of global interest rate cuts to soften the economic blow of the coronavirus. Bank of Japan Governor Haruhiko Kuroda said on Monday the central bank will take necessary steps to stabilize markets, while Federal Reserve Chair Jerome Powell said on Friday that the Fed would "act as appropriate" to support the economy.

    Grant Wilson, head of Asia Pacific at Exante, which provides advisory and data analytics to clients such as hedge funds and family offices as well as some central banks, said the firm has been advising clients to expect dramatic market conditions. Exante says that of the largest 25 players in foreign exchange markets, more than half are clients.

"This is a rally to sell," Wilson said.

"Once the reality of coronavirus sets in at a person-to-person level the assumptions we all have about financial markets will change," said Wilson in an email exchange.

Wilson estimates that numerous countries, including the United States and which he calculates as together totaling 40% of global GDP, are on the verge of imminent breakouts in the virus. That is in addition to countries representing 25% of the world's GDP which already are battling the virus on a large scale, such as China.

Exante’s view is a bearish outlook on the scale and damage that the coronavirus epidemic could unleash on the world, but not all investors agree. Some are looking to buy.

    Portfolio managers at Goldman Sachs Asset Management said on Friday they used the recent selloff in global stocks caused by the coronavirus as an opportunity.

    Exante's Wilson said problems could run deeper. Banks may be reluctant to refinance loans to companies if creditworthiness is deteriorating rapidly.

    Wilson, who prior to Exante, worked at Singapore sovereign wealth fund GIC, New York-based investment firm Moore Capital and founded a hedge fund, said Asia is ahead of the curve.

Hong Kong has eased fiscal policy by roughly 5% of GDP and Singapore by half of that, he said. China has eased macro-prudential standards giving small and medium-sized enterprises runway until the end of the second quarter.

     "Can the West be so agile? The short answer is no,” Wilson said.


(Reporting by Megan Davies; Editing by Andrea Ricci)