Until COVID Ends, Protect Principal—Don’t Blindly Add Positions
Until COVID Ends, Protect Principal—Don’t Blindly Add Positions Keep a good mood Topics: Invest, Risk.
Cycle
20200203-20200209
Market
| Market | Index | This week (%) | 1 week ago (%) | 2 weeks ago (%) | 3 weeks ago (%) |
|---|---|---|---|---|---|
| SSE | 3075.50 | -0.54 | 0.28 | ||
| SZSE | 10954.39 | 0.69 | 2.1 | ||
| ChiNext | 1932.51 | 1.49 | 3.71 | ||
| Hang Seng | 29056.42 | 1.46 | 0.66 | ||
| H-Share | 11419.91 | 1.35 | 0.12 | ||
| Red Chip | 4596.31 | 1.52 | -0.39 | ||
| Dow Jones | 29348.10 | 1.82 | 0.66 | ||
| Nasdaq | 9388.94 | 2.29 | 1.75 | ||
| S&P 500 | 3329.62 | 1.97 | 0.94 |
Review
In the pre-holiday note “Don’t Blindly Trust Fund Managers,” we said “barring extreme black swans before the holiday, the market should keep rising; even small dips aren’t serious, don’t cut positions blindly.” We also stressed “it’s your money; markets have risk; be cautious. Don’t be overconfident, don’t overtrust managers.” We had risk awareness but didn’t act on it, so in the last three sessions before the outbreak we stayed blindly optimistic.
Event
Only when Wuhan locked down on Jan 23 did we take COVID seriously. But with the holiday, A-shares were shut; we couldn’t reduce. On Feb 3, all three major A-share indexes gapped down over 8%. Except for medical protection/vaccine names, almost everything plunged.
This outbreak is taken very seriously from the top down; personal protection awareness is high. It should pass soon. We shouldn’t panic, nor be overly optimistic. Watch the outbreak. A deep squat in the short term doesn’t change a medium/long bull trend. Existing stocks/funds shouldn’t be blindly cut. Light positions can add a bit to biotech/oversold tech.
Rationale for rebalancing
Biotech related to the outbreak may be among the few resilient plays. 1) Medical devices, protection, and vaccines are livelihood essentials; even in severe outbreaks they don’t halt. 2) Biotech is the front line—sales may rise. When buying, prefer non-epicenter firms: simple logic—products from the epicenter struggle to ship out, while products from elsewhere can enter. For infrared thermometers, Hangzhou’s Dali Tech is more investable than Wuhan’s Guide Infrared.
Consensus pre-holiday still favors hard tech/China core assets. They have room. You can buy favored tech stocks.
Positions
| Type | Code | Name | This period |
|---|---|---|---|
| Stock | SZ002460 | Ganfeng Lithium | Flat |
| Stock | HK01772 | Ganfeng Lithium | Flat |
| Fund | F001790 | Guotai Smart Auto | Flat |
| Fund | F000404 | E Fund Emerging Growth | Flat |
| Fund | F005911 | GF Dual Engine Upgrade | Flat |
| Fund | F519778 | BOCOM Data Economy | Flat |
| Fund | F110026 | E Fund ChiNext ETF Lk A | Flat |
| CB | SZ123041 | Eastmoney CB | Flat |
Notes
Stay vigilant. The outbreak is basically contained now, but when firms and schools reopen and people move, it could worsen—stay alert. Until the outbreak is fully over, the priority is to protect principal—don’t blindly add positions.
During the outbreak, work from home, keep a regular schedule, exercise more, and keep a good mood.
