Raging Covid infections in poorer states becoming a problem
Although most Western countries are making good progress in their vaccination programs and keeping Covid contained, surging infections and deaths in India and Brazil and growing variants from these regions which seem to be killing the younger demographics have become key concerns and making it tougher in predicting an end to the pandemic. Certainly, the timeline looks to have been pushed out way beyond summer now.
Thankfully, US and Europe have recognised that containing the virus will need to be globally achieved or it will fail, and we still hope that medical science will prevail to put an end the pandemic, probably by the end of this year. However, vaccine production issues along with red tape have held up aid. Failing governance in these poorly affected countries is yet another barrier to overcome in order to tackle the raging infections.
Nevertheless, with vaccines being sequentially recalibrated for new variants and time needed to green-light them promised to be significantly shorter, we think vaccines will come through. We also suspect that more capacities will be dedicated in production of all the ingredients needed to make the jabs. Resumption in administering J&J vaccinations and the pending approval of the Novavax shot should also help increase global vaccine supplies. But these will take time and look more likely on the cards for the next quarter.
Short term visibility deteriorating on other fronts, namely technology
While US stock market continues with its upward trend, the under-currents seem far more ominous that go beyond the challenge of containing Covid in poorer nations. Judging by the market reaction we have seen thus far in the earnings season, corporate earnings growth for much of this year appears to be factored in. This is especially true in the technology space, which sets the tone for performance of growth stocks globally.
Over the past month, we have been warning investors about the potential for double ordering and the hoarding of technology components which have not only led to bottlenecks that have clearly hurt end-supply, but we suspect have created a false market that could leads to a major oversupply issues in the coming quarter. With geopolitical tensions between China and US also rising, technology has become a key battle ground which have further muddied the picture despite the healthy end-demand.
All these uncertainties give us pause in expecting Japan’s Topix to breakout above its 2K this quarter.With Japanese government also proving equally ineffective in containing the virus as some poorer nations but looking determined to go ahead with the Olympics against all logic, we think Japan will also urgently require US assistance in securing more vaccines. However, given the relatively small size of its population and the growing strategic importance of Japan to its Western allies, aiding the country is not such a daunting task and likely to be high on the agenda.