With the release of IMF’s global growth tomorrow, I thought it will be useful to write about the potential opportunity I am seeing for this week for some stocks I am eyeing for.

To recap, IMF last published their forecast and outlook for the global economy in Jan 2020, and they forecasted that growth in 2020 will be stronger at 3.3% (2019: 2.9%), with 2021 growth slightly stronger at 3.4%. The language in Jan 2020 admittedly did not consider the Covid-19 pandemic and instead focused on the trade war between US and China, Brexit, and the tensions between United States and its other trade partners. For Apr 2020, I expect the IMF to revise their growth forecast significantly downwards to recessionary conditions. In an earlier communication, IMF fully communicated that they expect that the global economy’s growth will turn sharply negative.

“Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020. Today, that number has been turned on its head: we now project that over 170 countries will experience negative per capita income growth this year…..Everybody hurts. Given the necessary containment measures to slow the spread of the virus, the world economy is taking a substantial hit…. It was already clear that global growth would turn sharply negative in 2020. In fact, we anticipate the worst economic fallout since the Great Depression.” Kristalina Georgieva, IMF, 9 Apr 2020

From the information above, there are 2 key points to my strategy this week for the market, depending on market reactions :-

1. Buy in when the market is selling off on news about global growth being revised downwards, by end-Wednesday or end-Thursday.
2. Focus on large and established companies with steady financials, that are undervalued.

Buy in when the market is selling off on news about global growth being revised downwards, by end-Wednesday or end-Thursday.

I expect there will be some form of sell-off if the IMF revised growth downwards significantly, as it will be an affirmation on how growth will look like in 2020. Based on the time zone differences, I expect the market will start pricing in the revisions on Wednesday as most analysts will be publishing the impact of the revisions also. In my opinion, the market is currently undervalued but considering that most companies have not published their 1Q financials, it is still uncertain whether current valuations have priced in fully the impact of the global growth. Looking back at KLCI’s performance for the last 3 months, I do still think there are room for further adjustment as the market might have only priced in the MCO impact the most and have not fully paid attention to the 2nd round effects of lower global demand impacting the local market.

Focus on established companies with steady financials, that are undervalued.

I will be looking at this as an opportunity for me to buy into companies that I have been looking closely at over the past several weeks. Companies that are currently beaten down but have steady financial performances, are my priorities this week. Please find below the 6 companies I am looking to buy in for this week.