Businesses are feeling the impact of the Covid-19 virus.
Just last week, the Ministry of Trade and Industry cut the gross domestic product (GDP) forecast range to between a negative 0.5% decline and a muted 1.5% expansion.
Popular tourist spots, from Chinatown to Marina Bay Sands and Sentosa, are seeing sparser crowds. Shopping malls are experiencing less foot traffic coming through their doors. Restaurants are emptier. Meanwhile, the transport industry is seeing lower ridership across taxis, buses, and MRTs.
In short, the near-term outlook for affected businesses is grim.
However, if we take a step back and take a broader view, I think you will see that there are growth trends that are likely to continue despite the Covid-19 outbreak.
Health is wealth
Shares of disposable glove manufacturers, such as Top Glove Corporation (SGX: BVA) and Riverstone Holdings (SGX: AP4), have seen their share prices spike as news of the virus spread.
However, prior to the outbreak, the glove industry has already been growing at between 8% to 10% per year.
A key reason behind the rise is the increased demand for better healthcare.
Based on UN projections for Singapore, elderly folks above 65 years are expected to make up 28% of the total population by 2030 and 47% by 2050.
As the population ages, we should expect the demand for healthcare to rise alongside.
Living off the cloud
We are now seeing the world’s biggest work-from-home experiment. People are turning to online services as they stay home to avoid the crowds.
The trend suits online cloud services such as Zoom Video Communications (NASDAQ: ZM) which provides online video conferencing.
But like healthcare, the move towards online computing has been happening prior to the onset of Covid-19.
In fact, Synergy Research estimated that the software-as-a-service (SaaS) industry drew in over US$100 billion in 2019, accounting for 23% of the total enterprise software market.
Today, business functions such as accounting, human resources, customer relationship management and more can all be operated out of the cloud.
The benefits of SaaS are numerous compared to traditional, on-premise software.
The typical SaaS provider is cheaper, more flexible and costs less to maintain. If businesses are looking to cut costs during difficult times, cloud computing could become a strong option.
Connected as ever
Air travel is muted today.
However, if we cast our eyes into the future, air travel is likely to increase in the future despite the current drop in demand.
In September last year, the Daxing International Airport opened in Beijing, promising to double the passenger flight capacity for the capital city. China invested US$11.5 billion into building the airport.
The expansion is not a rare one.
Down south, Hong Kong is looking to invest an estimated HK$141.5 billion (US$18 billion) to upgrade its airport and add a third runway to increase its flight capacity.
Closer to home, Singapore is already building towards Terminal 5, which is expected to nearly double its existing capacity from 82 million to over 150 million.
All three countries are aiming for the same thing.
According to airline catering firm SATS (SGX: S58), Asia Pacific is expected to add 1.8 billion travelers in the two decades between 2014 and 2034.
As the virus is contained over time, it is likely that the pent-up demand will lead to more travel in the future.
Get Smart: You can take the broader view
The intensity of the Covid-19 virus spread has been, without a doubt, alarming.
As a result, Singapore’s GDP forecast for the year is not promising.
In times of distress, investors may be lured into focusing on the short term problems — often at the expense of important long term trends.
That is why, as Smart Investors, we have to keep our eyes trained on the only horizon that matters in investing.
The long term.
Yes, there is going to be short-term pain. Some companies will get hurt more than others. But if we have chosen a diversified group of stocks, chances are — we will come out ahead in the long run.
And the long-term results, I submit, will make it all worth our time in the end.
This article was first published in our free investing education newsletter, Get Smart. If you’d like to learn more investing concepts, and how to apply them to your investing needs, click HERE to sign up now.
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Disclaimer: Chin Hui Leong owns shares in SATS.
