Following the worst shock to the global economy since the Great Depression, the Covid-19 pandemic and resulting lockdowns of 2020 are set to give way to a strongly reflationary environment in 2021.

Historically, the earnings of cyclical sectors such as real estate have been more sensitive to economic growth, and thus we expect the sector to be a beneficiary of this reflation theme ahead. Real estate has also historically been seen as a good hedge against inflation. In particular, Asia Pacific real estate as a sector should benefit from long term secular demand growth underpinned by favourable demographics, rising urbanisation rates and the growing middle class in Asia.

Another asset class that is expected to hold up well if Asia’s recovery leads the rest of the world is Asian bonds. Credit fundamentals are likely to remain steady, with credit default risk looking benign.