The COVID-19 epidemic has struck all aspects of the global economy: from employment to aggregate demand, from raw material supply to industrial production. Amid the epidemic, the capital market experienced unprecedented disruption. After triggering the circuit breaker four times in the U.S. stock market, the inopportune oil price shock led to an unforgettable quarter for global investors. With the virus being largely contained, China was among the first to restart the economy. However, despite the great effort into business resumption, the economy has not yet back to normal, especially in the labour-intensive service industry. Overseas economies are still struggling with containing the virus, businesses are unlikely to resume any time soon. Amid the re-escalation of geopolitical tension, the hope for a V-shape global recovery is dimming.

 

Four panellists: Mr Tu Guangshao, Mr Bob McCooey, Professor Liu Guoen and Professor Zhang Xiaoyan shared their views on the capital market amid the COVID-19 epidemic.

 

Chinese capital market remained resilient, reforms are underway

Mr Tu, Chairman of Shanghai Finance Institute, discussed the operation of the Chinese capital market amid the epidemic from three aspects. Firstly, the A-share market was quick to reflect the shock to the economy by COVID-19. The impact of the epidemic is felt differently among different sectors of the economy. Secondly, the Chinese capital market operated effectively as transactions and direct financing remained undisturbed during the epidemic. Judging from daily transaction data and the amount of IPO, re-financing and new mutual fund issuance, we can confidently say that the capital market remained relatively stable. On the other hand, although the capital market has played a crucial role in the fight against the virus and helped stabilise the economy, it becomes more important for listed companies to comply with relevant regulations on information disclosure and corporate governance. Thirdly, even during the epidemic, we pushed forward the opening up of the Chinese capital market. For example, we have approved the registration-based IPO system for ChiNext. Together with the revision of the Securities Law, the capital market reform has gathered speed and was not disrupted by the epidemic.

 

Scientific advancement grants more flexibility during the epidemic

Mr McCooey, Chairman of Nasdaq Asia Pacific, discussed how innovations played their part in this fight against COVID-19. With social distancing in place, people turned to working remotely and online economic activities became the perfect substitute for offline economic activities. Despite the sudden halt of many industries, some sectors experienced unprecedented boom. A stock exchange like Nasdaq with no physical trading floor can still operate efficiently with the current social distancing rules.

 

We have more than 600 pharmaceutical companies listed on Nasdaq, these companies played an invaluable part in developing vaccine and helping the infected, and via Nasdaq, these companies get access to funding for expansion. Nasdaq also played her part in fighting against the epidemic, albeit indirectly. There are numerous high-tech companies listed on Nasdaq, whose products help smooth our lives during difficult times like this. Innovation gives us more ‘weapons’ in the challenges we face.

 

The capital market is still under pressure posed by the epidemic

Professor Liu from Peking University argued that the current resilience of the Chinese capital market can be explained by, first, the Chinese capital market being less open to global investors, and second, the first wave of infection is at an end. We cannot ignore the long-term impact of the epidemic on economic fundamentals. In the end, the development of the capital market depends on whether the global epidemic can be successfully contained within 6 months and in the future.

 

Aggregate demand determines the pace of recovery. Unlike the shock to the economy during wartimes, when aggregate demand in one country disappears, the demand in another country may surge. During the current epidemic, global demands are interconnected such that should there be further waves awaits, we have to be fully prepared.

 

Staying rational during the epidemic is more important than ever

Professor Zhang from Tsinghua PBC School of Finance illustrated that during the time of extreme uncertainty, investors need to think rationally about the ultimate goal and the purpose of making a certain investment. The key is to understand if a certain product is compatible with your personal risk preference before making decisions of asset allocation. Investment return is positively correlated with investors’ information and knowledge. If you are not familiar with the market, your investment may turn into a loss. Essentially, how much return you get depends upon your ability to process information efficiently and to pick the right stock at the right time.

 

Our research has shown that even for institutional investors, failing to recognise the correct timing will inevitably lead to minus return. On the other hand, Chinese individual investors hardly obtained any positive return owing to unable to pick the right stock at the right time. It is hence extremely difficult to succeed in equity investment without professional knowledge.

 

In general, the global economy and capital markets are severely hit by the epidemic. During the time of extreme uncertainty, individual investors should be much more careful and think rationally. Certainly, this epidemic has also brought opportunities. By deciding what and when to buy, institutional investors are able to obtain excess return and lower risk exposure with the help of the latest academic research.

The capital market amid the COVID-19 epidemic

 

The COVID-19 epidemic has struck all aspects of the global economy: from employment to aggregate demand, from raw material supply to industrial production. Amid the epidemic, the capital market experienced unprecedented disruption. After triggering the circuit breaker four times in the U.S. stock market, the inopportune oil price shock led to an unforgettable quarter for global investors. With the virus being largely contained, China was among the first to restart the economy. However, despite the great effort into business resumption, the economy has not yet back to normal, especially in the labour-intensive service industry. Overseas economies are still struggling with containing the virus, businesses are unlikely to resume any time soon. Amid the re-escalation of geopolitical tension, the hope for a V-shape global recovery is dimming.

 

Four panellists: Mr Tu Guangshao, Mr Bob McCooey, Professor Liu Guoen and Professor Zhang Xiaoyan shared their views on the capital market amid the COVID-19 epidemic.

 

Chinese capital market remained resilient, reforms are underway

Mr Tu, Chairman of Shanghai Finance Institute, discussed the operation of the Chinese capital market amid the epidemic from three aspects. Firstly, the A-share market was quick to reflect the shock to the economy by COVID-19. The impact of the epidemic is felt differently among different sectors of the economy. Secondly, the Chinese capital market operated effectively as transactions and direct financing remained undisturbed during the epidemic. Judging from daily transaction data and the amount of IPO, re-financing and new mutual fund issuance, we can confidently say that the capital market remained relatively stable. On the other hand, although the capital market has played a crucial role in the fight against the virus and helped stabilise the economy, it becomes more important for listed companies to comply with relevant regulations on information disclosure and corporate governance. Thirdly, even during the epidemic, we pushed forward the opening up of the Chinese capital market. For example, we have approved the registration-based IPO system for ChiNext. Together with the revision of the Securities Law, the capital market reform has gathered speed and was not disrupted by the epidemic.

 

Scientific advancement grants more flexibility during the epidemic

Mr McCooey, Chairman of Nasdaq Asia Pacific, discussed how innovations played their part in this fight against COVID-19. With social distancing in place, people turned to working remotely and online economic activities became the perfect substitute for offline economic activities. Despite the sudden halt of many industries, some sectors experienced unprecedented boom. A stock exchange like Nasdaq with no physical trading floor can still operate efficiently with the current social distancing rules.

 

We have more than 600 pharmaceutical companies listed on Nasdaq, these companies played an invaluable part in developing vaccine and helping the infected, and via Nasdaq, these companies get access to funding for expansion. Nasdaq also played her part in fighting against the epidemic, albeit indirectly. There are numerous high-tech companies listed on Nasdaq, whose products help smooth our lives during difficult times like this. Innovation gives us more ‘weapons’ in the challenges we face.

 

The capital market is still under pressure posed by the epidemic

Professor Liu from Peking University argued that the current resilience of the Chinese capital market can be explained by, first, the Chinese capital market being less open to global investors, and second, the first wave of infection is at an end. We cannot ignore the long-term impact of the epidemic on economic fundamentals. In the end, the development of the capital market depends on whether the global epidemic can be successfully contained within 6 months and in the future.

 

Aggregate demand determines the pace of recovery. Unlike the shock to the economy during wartimes, when aggregate demand in one country disappears, the demand in another country may surge. During the current epidemic, global demands are interconnected such that should there be further waves awaits, we have to be fully prepared.

 

Staying rational during the epidemic is more important than ever

Professor Zhang from Tsinghua PBC School of Finance illustrated that during the time of extreme uncertainty, investors need to think rationally about the ultimate goal and the purpose of making a certain investment. The key is to understand if a certain product is compatible with your personal risk preference before making decisions of asset allocation. Investment return is positively correlated with investors’ information and knowledge. If you are not familiar with the market, your investment may turn into a loss. Essentially, how much return you get depends upon your ability to process information efficiently and to pick the right stock at the right time.

 

Our research has shown that even for institutional investors, failing to recognise the correct timing will inevitably lead to minus return. On the other hand, Chinese individual investors hardly obtained any positive return owing to unable to pick the right stock at the right time. It is hence extremely difficult to succeed in equity investment without professional knowledge.

 

In general, the global economy and capital markets are severely hit by the epidemic. During the time of extreme uncertainty, individual investors should be much more careful and think rationally. Certainly, this epidemic has also brought opportunities. By deciding what and when to buy, institutional investors are able to obtain excess return and lower risk exposure with the help of the latest academic research.