Citi Thailand likes defensive stocks focused on digital and health tech to build a positive return on investment for high-net-worth customers amid recurring financial market volatility caused by the coronavirus crisis.
Boonnisaed Thanyaworaanan, investment adviser at Citi Thailand, said the capital and money markets have seen sporadic volatility globally because of the pandemic, subsequently resulting in higher risk in investment.
The crisis does, however, offer an investment opportunity in defensive stocks with hedging characteristics, especially digital and health tech stocks, Mr Boonnisaed said.
Most governments worldwide have been increasing healthcare budgets. Meanwhile, tech-related businesses have shown greater potential in the digital era.
With this scenario, Citi is paying more attention to defensive stocks with a focus on the Chinese and US markets in order to build up return on investment amid the pandemic.
For this year, Citi forecasts earnings per share of listed companies globally to decline by 50% compared with last year, mainly due to pandemic impact, while dividend payments worldwide will likely drop by 35%.
As a result, investment in defensive stocks is an alternative during the economic downturn.
The global economy is forecast to shrink by 3.5% this year, but recovery momentum is expected to gradually pick up in the second half of the year.
Global economic growth is predicted to continue recovering into next year, with annual growth projected at 5.5%.
Global inflation is also forecast to increase from a 1.8% projection this year to 2.4% next year.
Mr Boonnisaed said Citi expects the pandemic to have a more severe effect on the global economic recession than the US financial crisis had in 2008.
The situation will continue to improve, however, in accordance with the easing of lockdown measures in several countries after the outbreak has been contained effectively.
Asia's economy is expected to grow by 0.5% this year, especially in China, which could see 2.4% growth driven by strong domestic demand, Mr Boonnisaed said.
Although China was the first country where an outbreak occurred, it has gradually begun to see increased domestic activity and the first quarter may have been the lowest point of the economic slowdown, he said.
The US economy is expected to shrink by 3.3% this year. Even so, it has shown promising signs after an improved unemployment rate and higher retail sales in May, Mr Boonnisaed said.