Bear Markets Should Not Lead to Less InvestmentBy Gabriela Mastache | Mon, 03/23/2020 - 13:00
Talks about an upcoming economic crisis, combined with reduced consumption of products and services, have led to an overall fall of international markets, which in the US has already been dubbed as a bear market. In this global scenario, the Mexican Stock Exchange (BMV) and its International Quotation System* (SIC) have also taken dire hits. However, not everything is bad news for public companies. According to Alberto Carrillo, Analyst at Signum Research, there are investment opportunities that can result in short-term gains for investors and companies.
Globally, those with the biggest opportunities are pharmaceutical companies. For instance, Regeneron Pharmaceuticals, Forty Seven, Gilead Sciences, Novavax, Moderna, Omeros, Inovio and Compugen are seen as an interesting investment opportunity at the moment. Though companies like Gilead Sciences, Moderna, Omeros, Inovio and Compugen have registered losses in past days, these are the companies that are currently working on developing either a vaccine or a treatment against COVID-19. The downside is that these solutions might not offer long-term profits, since many of these treatments might not be commercialized.
However, not only companies in the pharmaceutical sector are expected to have a positive performance on international markets. The entertainment sector also offers interesting investing opportunities. Netflix, New Oriental Education, Tal Education Group and BiliBili have registered positive growth, boosted mainly by the demand these companies have registered in past weeks.
Another sector that offers long-term opportunities is the e-commerce segment. According to an S&P Global Market Intelligence report, the current COVID-19 pandemic has shifted consumer behavior in China, resulting in growth of e-commerce sales. When analyzing overall e-commerce growth, even though 2020 registered slower growth than in previous years, analysts said performance has been better than what was expected. Slow growth does not mean less clients nor less purchases, but that consumers are purchasing low-cost products such as grocery items, rather than clothes or large furniture, they explained.
Though demand for e-commerce services is bound to increase, analysts believe this will not translate into a revenue increase, since product demand has been focused on first-hand items, rather than discretionary goods. Still, for e-commerce companies to weather the current market instability successfully, they have to be able to protect their logistics chain.
*The International Quotation System (SIC) includes foreign public companies that operate in Mexico. SIC has registered over 1,500 foreign securities listed from different countries and sectors. Around half of these listing are stocks, while the other half are exchange-traded funds (ETFs). These allow investors in Mexico to buy shares from these companies.