For Taiwan local investors, 2022 has been a turbulent year so far.
Although investors did expect inflation to spike in 2022, and believed the Fed will take actions accordingly, it’s out of anticipation for the market that Russia’s hostility to Ukraine led to the war eventually. Due to higher commodity price, Fed has to take aggressive rate hike action, forcing entire market become worse and worse, either bond or equity market. Taiwan equity market shows certain resilience in first quarter, but still follow global market to slump since second quarter. All sentiments become extremely bearish at this moment.
In addition, Omicron variant is another hit to Taiwan local economy. Strict border controls and compulsory restrictions (such as mask-wearing policy and lengthy quarantine measures) have protected Taiwan from pandemic for two years. With more than 70% of population double-vaxxed and more than 50% people have taken 3rd dose, government is considering to gradually lift restrictions, and prepared to reopen the border for business travelers in first quarter.
However, same as most of other countries in Omicron pattern, confirmed cases spiked in Taiwan since April. Although the government does not plan to implement lockdown measures again during this “second wave” of outbreak, spread of the omicron variant still to a high extent impacts people’s daily lives and interrupts business activities, which results in risk-off sentiment for local investors.
2022 Daily New Cases in Taiwan
Source: udn, as of May 18
Over the past two years, even though strict border controls and quarantine policy blocked travelers to Taiwan, managers still could interact with local clients in form of video conference/ webinar. However, since the outbreak in April, almost all client-facing activities are postponed or cancelled. It’s the first time that on May 18, daily new cases go to over 80,000. Based on epidemiologist’s anticipation, peak of daily new cases will be some point in June. We believe client-facing activities will be gradually “back to normal”, and expect the government to reopen the border, which could be Q4 this year, after the pandemic shows a sign of easing.
Fortunately, during this challenging period, our two major government pension funds, Bureau of Labor Funds (BLF) and Public Service Pension Fund (PSPF), still launch ESG related equity mandates as schedule, totally amounting to $2.3Bn and $1Bn respectively. These two mandates attract many global asset managers to submit RFP for tender. The final result is expected to come out around late June to early July. Meanwhile, BLF is preparing to announce fixed income mandate in the second half of 2022, according to its asset allocation.
There is a saying that buying opportunities show when others fall into desperation. It’s not easy to judge when the low point stands in this year, but we should still positively look forward to new dynamic or business opportunities after the huge cycle. Please don’t hesitate to contact us if you’re interested in discussing any idea for the next half of year. We look forward to meeting you physically soon!