With vaccines now being produced and distributed, the progress of vaccination varies significantly across the world. While Asia has been relatively successful in containing the virus, its vaccination progress has been slow relative to the U.S. and the UK. Of the total doses administered worldwide, Asia accounts for 40% so far, even though the region comprises 60% of the world’s population.

There are two factors that account for the relatively slow progress. Not every government has secured sufficient vaccines for the whole population. This is expected to ease once production is stepped up and possibly a greater number of vaccines are available in the market. Generally, they have also taken a more cautious approach in approving the use of vaccines relative to the U.S. and Europe. Compared to other economies, many of which initiated vaccinations at the end of last year, most of Asia plans to only begin in 1Q21 (Exhibit 1).

In China, initial plans to administer 100 million doses (or inoculate 50 million people) by the Lunar New Year holiday have been pushed back two months to the end of March. As of February 9, 40.5 million doses have been administered. This could be a result of the population wanting to observe the effectiveness of the vaccine, as well as lower infection rates, both of which have led to a lack of urgency to get vaccinated. Moving forward, frontline workers will continue to be the focus, before vaccinations move on to vulnerable groups such as the elderly, and finally widening to the general public in April.

In Southeast Asia, Singapore is predicted to achieve widespread vaccine coverage by early 2022, followed by Vietnam, Thailand and Malaysia, according to the Economist Intelligence unit. However, poorer nations in the region are expected to lag. These countries are largely reliant on the World Health Organization’s COVID-19 Vaccines Global Access Facility initiative, which is intended to cover 20% of each country’s population, and China’s Sinovac vaccine to make up the shortfall. Further logistical difficulties may arise during the distribution process, particularly in accessing remote parts of the region and in storing vaccines in the tropical climate. 

Asia’s vaccination timeline and progress
Exhibit 1: Asia's vaccination plan

Sources: Our World in Data, J.P. Morgan Asset Management. Vaccination timelines are per various government targets.
Data reflect most recently available as of 16/02/21.

Investment Implication

While Asia has lagged the rest of the world in vaccinations, we remain constructive on Asian equities. Compared to the rest of the world, Asia has been less reliant on vaccines for its economic recovery, instead depending on effective testing, contact tracing and strict border controls.

The rollout of vaccines over the next few months should help underpin Asian economies’ recovery in the second half of the year as normality returns and consumers are free to unleash their pent-up savings. Stocks that stand to benefit the most will likely be rotated from the current COVID-19 winners to those that lost out from the pandemic (e.g., Northeast Asia to Southeast Asia, technology and health care to cyclical).

China’s strong economic recovery, as reflected by its 6.5% GDP growth in 4Q20, as well as long-term structural trends like consumption growth and technological advancements, should continue to act as tailwinds for the market. Valuations for A-shares are also still in line with their long-term averages. In ASEAN, market performance has lagged. However, these markets are also likely to benefit most from a recovery in tourism as vaccinations around the world ramp up, which could help boost earnings substantially.

A potential risk arises if there is a delay in the vaccine rollout, which could delay Asia’s recovery and this rotation. Nevertheless, this may only be a temporary dampener to Asian assets sensitive to the pandemic. Improvements in the U.S. and Europe should help support Asian trade and the economy while domestic services sectors gradually recover. We believe investors should maintain a diversified portfolio of Asian equities to capture these opportunities.