Post-Pandemic Investment Opportunities: Which Industries Will Have a Quantum Leap?

Dinara Inkarbekova
managing partner at Sigma Capital

The coronavirus pandemic has taken everyone by surprise, regardless of their profession or educational background. The crisis has seriously destabilized stock markets and changed the developmental course of entire industries and the global economy as a whole. Some sectors are struggling to survive while others are trying to make the most of the opportunities that have arisen since the outbreak.

One thing is for sure: the coronavirus crisis has already radically transformed the old way of life and will result in a new norm the world over.

Consequently, both institutional and private investors are realigning their priorities in accordance with the assessment of potential risks and benefits from current and future projects. According to a study by UBS Investor Watch, 75% of the world’s major investors believe that their lives and preferences will change significantly after the pandemic, with 83% of respondents planning to work more closely with their investment advisors.

The resource economy era is giving way to the era of high technologies. The pandemic has considerably sped up digital transformation and caused a seismic shift in the development of big data, AI, cloud services and financial technologies.

Remote working, or, as they say in the West, smart working, has resulted in significant adjustments to the development of e-commerce, cloud solutions for remote work and study, and, lastly, digitized customer service (e.g, chat bots, call centers based on artificial intelligence, et al).

E-gaming and all kinds of digital entertainment industries are also displaying growth – quite understandably. We don’t know when we’ll be able to fully return to mass events given that sports stadiums will cause concern for a long time as will festivals and concerts around the world. The reintroduction of such entertainment has begun with events being held in open air arenas and with limited audiences. The same is true for movie theaters and entertainment centers. The Ultimate Fighting Championship (UFC) lost over $100 million in profits due to the pandemic. Because of the cancelation of Wimbledon, the local tennis association stands to lose almost $243 million in profits.

On the other hand, in the first three months of the initial wave of the pandemic, the number of daily active users of the Snapchat messenger grew by 20% compared to last year to nearly 229 million people. The number of users of the streaming service Netflix increased by 15.8 million people, up from 182 million, which was twice the original forecast.

In early April, the world famous steeplechase Grand National, held annually in England since 1839, was conducted virtually. The racing results were simulated using computer calculations and presented in a CGI format. The CGI-modeling took into account and recreated a plethora of small nuances: mud flying from under the horses’ hooves, spectators in the stands and even an ambulance for fallen riders. The average number of viewers during the broadcast was about 4.3 million people, and 4.8 million at the peak.

Digital payments. According to the Financial Institutions' Association of Kazakhstan, as of July 1, 2020, the volume of non-cash card payments in the country broke the historical record in May, and then did so again in June. It increased from 2.4 trillion tenge to 2.7 trillion tenge (+15.4%). In comparison with the same period last year, there is a more pronounced growth: by 2.7 times from 1 trillion tenge.

Medicine and telemedicine. Deloitte predicts that global health spending will reach $10.059 trillion by 2022. Today, telemedicine is developing rapidly in many countries according to VEB Ventures. Specifically, global attendance of telemedicine centers is expected to grow some 5.5 times: from 36 million visits in early 2020 to 200 million visits by early 2021.

The World Health Organization stressed the importance of using technological solutions like telemedicine to combat the COVID-19 pandemic. In the USA, the number of consultations of the telemedicine company Teladoc increased to 20,000 a day, the number of new users in the Swedish service Kry grew by more than 200%; in the UK, Push Doctor reported that the number of calls per week increased by 70%.

In many countries, including Kazakhstan, governments have taken emergency measures on easing telemedicine legislation and mandated inclusion of online consultation in insurance programs.

Renewable energy sources. Vehicles consume a third of all global refined energy with over 96% of that energy coming from fossil fuels. Nevertheless, the situation is gradually changing. Some countries and regions are already planning to phase out new vehicles with combustion engines by 2050 or even sooner.

Currently, wind is the cheapest source of electricity in the world, accounting for some 6% of global electrical energy. According to the international rating agency Moody’s, COVID-19 could become the reason for an accelerated switch to green energy.

“During this period, activity in sectors operating with the use of hydrocarbons has decreased considerably. Consumer behavior has also changed. Economic recovery measures by governments worldwide are also enabling a faster transition to green energy,” the report from Moody's said.

Experts note that companies will have to change their strategic focus in order to meet the needs of a population that have changed during the pandemic. They expect an increase in demand for renewable energy sources (RES). At the same time, production of natural gas will increase while the demand for coal energy will decrease.

In general, the current crisis will bring about not only changes in behaviors toward material goods, but also rather significant value swings. Most people are at a stage wherein they are rethinking family values and the importance of health, be it physical or mental.

As such, it can be assumed that in the future the main investment flows will be directed to human capital, health protection and life extension. ESG factors will play an even greater role: environmental protection, social responsibility and best corporate governance practices. Employees, including asset managers, will require such soft skills as empathy, a sense of justice, a flexibility and adaptability to changing situations and an ability to quickly respond to a consumer’s vital needs– whether it’s the formation of a financial reserve, money for the education of children or retirement savings.

* 1 USD = 418.62 KZT as of August 24.

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