Vaccine Discovery theme gaining momentum


Further upside for “Pandemic Victims” becoming “Vaccine Winners” is on the cards.
Chief Investment Office11 Nov 2020
Photo credit: AFP Photo


Pfizer announced 90% effective rate for a COVID-19 vaccine. A vaccine jointly developed by Pfizer (PFE US) and BioNTech (BNTX US) attained 90% effective rate in preventing COVID-19 based on Phase 3 trial results. Volunteers who received the experimental vaccine were said to achieve protection in 7 days after the second dosage, and 28 days after the first. This discovery signifies a critical milestone in the global race to find a vaccine as the pandemic rages on. Should Pfizer and BioNTech be granted regulatory approval, the companies are expected to produce up to 50m doses this year.

Vaccine Discovery Theme – Our standout call has paid off. On 24 August 2020, we published CIO Perspectives – Pandemic Fatigue: Time to position portfolios for vaccine discovery. We made an early call for investors to position their portfolios for potential vaccine discovery and the rationale were:

1.       Fatality rate for COVID-19 is on the decline, thus reducing the likelihood of economic lockdowns.

2.       Portfolio allocators suffering from “pandemic fatigue” and forecasts from Good Judgement suggest that a vaccine is on the way.

To participate in this “Vaccine Discovery” theme, we advised investors to gain exposure to the following industries/segments:

  • Restaurants, Hotels, Casinos, and Leisure: Industries that require face-to-face interactions were hard-hit during the pandemic as safe distancing rules kicked in.  But these segments are poised for strong rebound in the event of a vaccine discovery as global tourism would return to more normal levels. 

  • Athleisure: The sales outlook for sportwear companies is poised for recovery as economic lockdown eases and domestic consumption improves. Athleisure is a long-term secular theme riding on millennial consumption.

Our timing has proved prescient. Since 24 August, our “Pandemic Victims” index (consisting of MSCI World Hotel, Restaurants & Leisure, and S&P Global 1200 Casinos & Gaming) has outperformed global equities by 6.5 %pts while our “Athleisure” theme has also outperformed by 10.1 %pts.

“Pandemic Victims” Index – More upside ahead; now is the time to gain exposure. As vaccine news continue to gain momentum in coming months, we expect further upside for the “Pandemic Victims” index. For investors that have yet to gain exposure, the time to be engaged in this sector is now.

Figure 1: News of potential vaccine discovery driving risk assets higher

Source: Bloomberg, DBS

 

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