Which Regions Have Recovered from the Coronavirus Sell-Off?

As first in and first out of lockdown, China is leading the global recovery. But the UK and Latin America are struggling to make up lost ground

Annalisa Esposito 24 August, 2020 | 10:39AM
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The coronavirus pandemic has indiscriminately hit countries around the world, but the way that stock markets are recovering is more varied. While some economies have bounced back sharply, others are still struggling to regain their poise. 

The divergence in performance between the best and worst performing regions year to date has been striking to say the least. Morningstar Direct data shows that backing the wrong regions could have seriously affected your investment returns this year. 

Our interactive map gives an insight into the performance of funds across the world year to date. What has changed since our previous map back in March?


Best Performing Regions

Countries such as Denmark and China brought the virus under control early, have been opening up, and so recovering the fastest. This means they lead the pack of best performing regions year to date. The average fund investing in the equities of these countries have soared 22.6% and 20.5% respectively year to date, even despite the hefty sell-offs seen in March. 

Denmark, in particular, was one of the first European countries to go into lockdown to stem the spread of the virus, shutting its borders, schools and restaurants in March. China, meanwhile, first introduced its only lockdown measures in January. 

Chinese funds were also among the best performing funds in July, for the second month in a row. But while well-known tech giants in the region, such as four-star rated Tencent (00700) and three-star rated Alibaba (BABA) have outperformed after benefitting from the switch towards remote working and online shopping, the territory also offers more niche, hidden gems for those willing to search. For example, Bilibi (03TW)and Hengan (HGNC) are two companies which have also strongly taken advantage of the pandemic crisis and its new behavioural shifts.

Another of the regions on our map in green territory is the US, where funds are up an average of 3% year to date. However, this overall figure masks a wide disparity depending on investment style: while the average large-cap growth fund in the region is up 18.4% year to date, value funds are down an average of 8%. It's no surprise that US and growth-focused funds have remained very popular options during the year.

US mid-cap and US small-cap funds are also starting to recover, albeit at a slower rate, returning 1.9% and 1.8% respectively over the period. 

Worst Performing Regions

At the other end of the spectrum, Latin America has endured some of the biggest losses this year. On average, funds in this region have tumbled by 29%, with Brazilian funds the worst affected, down an eye-watering 33% year to date. 

South America has struggled to contain coronavirus cases, but has also been hit by the collapse in the oil price and a strong US dollar. Border closures have hurt the export-reliant region, too. 

In Europe, meanwhile, the situation doesn’t look much brighter, with the average fund in Italy and Spain falling by 6% and 17% respectively. In particular, Spain has seen a surge in Covid-19 cases this month, leading to concerns around the economic ramifictions of a second wave. 

Closer to home, the average UK fund has tumbled by 15.9%. All five UK-focused Morningstar categories are in negative territory year to date, but the worst one has been by far the UK income sector, which has plummeted by 20%. The category has been very unpopular among investors this year as companies have cut dividends. The Investment Association (IA) has even temporarily suspending dividend yield targets for funds in its UK Equity Income sector to avoid a raft of funds being ejected from the group. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Annalisa Esposito  is a data journalist for Morningstar.co.uk

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