It has been a little over 100 days since the World Health Organization declared COVID-19 a pandemic. The world has since suffered more than 500,000 deaths from the deadly virus, the economy was shuttered and then slowly reopened, and meanwhile the investing markets produced record volatility.
A month before the WHO declaration on March 11, stocks worldwide were trading at record highs, with the global benchmark index – the US Dow Jones Industrial Average – registering an all-time closing high on February 12, and the S&P 500 Index and Nasdaq Composite Index following suit on February 19.
This way market investors can see what lessons can be learned from this crisis, inferring what type of stocks and sectors are better placed to ride out similar market crises – if they were to happen again in the future.
Analysing the trends on which stocks and sector outperformed or underperformed during the crisis, will give you an idea or an indication on whether you need to invest in them going forward in a similar crisis-like scenarios.
Although not a definate indicator, and can often change and cannot be solely relied upon, it can help an investor make tweaks to his or her portfolio.
Investors get back what was lost
Since March 10, a day earlier, investors have largely got back what they lost if they stayed invested during the period and if they could withstand the downturn. On Wall Street, the Dow Jones rose over 4 per cent, while the S&P 500 gained 8 per cent, and the Nasdaq soared 18.8 per cent, as at last week’s close.
As Wall Street and global benchmarks rebound from the ‘corona-crash’ in March, UAE bourses too have been taking huge strides back to pre-pandemic levels.
The Dubai Financial Market (DFM), which sank as much as 30 per cent during the worst of the crisis since a peak hit this year, has clawed back much of its losses in the past 100 days to currently trade down 6.8 per cent. The Abu Dhabi Securities Market has regained its losses in the period to trade up 2 per cent.
Which sectors gained amid the crisis, and which had the most to lose?
Among the 11 sectors of the S&P 500, information technology (IT) and consumer discretionary stocks have been the clear winners during the pandemic, with over 16 per cent gains made since the WHO declaration in the start of March. (What are these sectors and what firms make up these sectors? Read box below.)
However, real estate and utility stocks have recorded the biggest losses, with the property sector dropping 4 per cent and utilities dropping 7.6 per cent.
The energy sector has gained over 11 per cent since then, which reflects the partial recovery of oil prices as economies worldwide begins to reopen. The oil recovery has been helped by OPEC+ producers’ agreement June 6 to extend production cuts until the end of July.
The consumer discretionary sector comprises businesses that sell nonessential products and services that consumers may avoid without any major consequences to their well-being.
Utilities sector refers to a category of companies that provide basic amenities, such as water, sewage services, electricity, dams, and natural gas.
The real estate sector includes companies that own, develop, and manage residential, commercial, and industrial properties.
The energy sector is a category of stocks that relate to producing or supplying energy. The energy sector or industry includes companies involved in the exploration and development of oil or gas reserves, oil and gas drilling, and refining.
How sectors performed on the UAE benchmark
On the DFM, over the last three months the country’s top banking sector slipped 7 per cent, however the investing and financial services companies and insurers together rose 7.5 per cent. The sector comprising of the emirate’s popular property heavyweights gained 2.3 per cent.
The clear winners on the stock market were however the transportation index, which comprises mainly of aviation and logistics stocks, gaining a mammoth 21.4 per cent. The services industry too recorded strong gains, rising over 17 per cent in a little over three months.
(What is the service sector? It consists of companies that involve in production of services instead of end products. Services include attention, advice, access, experience, and affective labor.)
Which stocks recorded the most gains and which of them declined the most in this crisis?
Of all 30 components on the Dow Jones Industrial Average, 18 stocks gained since the World Health Organization declared COVID-19 a pandemic, while the remaining declined.
Tech titan Apple was the top performer with the iPhone maker gaining a massive 23.2 per cent, while other giants like Microsoft and Caterpillar followed close behind, by rising over 20 per cent each.
IT firms Cisco and Intel and popular sports brand Nike racked up gains between 12-15 per cent, while investment bank Goldman Sachs and retailer Home Depot rose a little over 10 per cent.
Oil behemoths Chevron and Exxon Mobil, and payments firm Visa and entertainment company Walt Disney, all rose between 6-7 per cent.
Meanwhile in Dubai, Gulfa Water, the firm that processes and packages naturally sourced water from Ajman’s Masfout mountains, was the biggest gainer during this excruciating period for markets. The stock gained 169.6 per cent, however, just 70 trades were recorded on the stock. Among other consumer staples and discretionary stocks, DXB Entertainments rose 10.5 per cent to about 15 fils.
In the transportation sector, logistics major and express courier Aramex gained 38.5 per cent, while Gulf Navigation, the only shipping company listed in the DFM, rose 25.5 per cent. In the services sector, Middle East-focused Amanat Holdings, which claims to be the region’s largest integrated healthcare and education company, rose 36.3 per cent.
Among the investing and financial service providers the DFM entity gained 22.3 per cent, while Dubai-based financial services provider Shuaa Capital dropped over 20 per cent over the past three months.
Among insurers, Islamic Arab Insurance Company (Salama) gained a massive 29 per cent. Insurance firm Dubai Islamic Insurance and Reinsurance Co Aman rose 16.5 per cent, while Dubai-listed Oman Insurance Company (OIC) dropped 14 per cent.
Deep losses were recorded in the vital lending sector, with stocks like Commercial Bank of Dubai declining 20.7 per cent, Emirates Islamic Bank dropping 21.6 per cent and Dubai Islamic Bank falling about 10.6 per cent. Top lender Emirates NBD slipped 1.3 per cent.
Among the closely watched real estate sector, firms Damac Properties rose 32.5 per cent and Deyaar Development gained 20.6 per cent, while Emaar Development slumped 29 per cent and Emaar Malls slipped 2.3per cent. Parent company Emaar Properties gained 0.7 per cent in the period.
Among telecom stocks, Du (Emirates Integrated Telecommunications Company) slipped 4.6 per cent during the period.