Joint Statement by Baillieu Limited Chairperson David Trude and Managing Director Gavin Powell

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Stocks for a vaccine

Despite a strong recovery from the March low, the ASX 200 remains 16% below its pre-COVID-19 peak. Many stocks in sectors most affected by COVID-related restrictions are much further below pre-COVID levels.

Looking ahead, strong progress is being made toward a vaccine, with 35 candidates in human trials, including 11 in Phase III testing and at least six targeting emergency use approval by year-end.

The economic and market implications of a vaccine should be significantly positive, including a surge in confidence, release of substantial precautionary savings by consumers and business, positive wealth effects, the reopening of restricted sectors and an intensified impact from zero rates. The market would move to discount a near-term V-shaped recovery.

Sectors most impacted by the COVID downturn would particularly benefit, including the bank, insurance, entertainment, transport and infrastructure sectors.

The banks should benefit from reduced provisioning, cheap funding and reduced branch networks. The insurers should see a lift in premiums to offset low rates. Casinos should benefit from reopening, though VIPs should be slow to return. Qantas Airways (QAN) would benefit from a stronger competitive position and reduced cost base. Transurban (TCL) should benefit from the domestic boom and growth projects.

The retail REITs face the structural headwinds of surging online growth and shrinking department store footprints, which reduce the landlords leverage over retailers.

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