Don't Expect The Volatility Lull To Last

So renewed bouts of elevated volatility are likely over the coming months, in our view. Investors can take advantage of this backdrop, however. Low volatility at present reduces the cost of locking in downside protection.

Meanwhile, future downside volatility can create better entry points for investors seeking to build up longer-term exposure. For more on using volatility to invest and protect, click here.

Caught our attention

• Monopoly verdict for Baba — now what? China’s government on Saturday imposed a record CNY 18.2bn (USD 2.8bn) fine on Alibaba following a multi-month anti-monopoly probe. In its ruling, the State Administration for Market Regulation (SAMR) found Alibaba "abused its dominant market position" in a way that "eliminated and restricted competition" in China's e-commerce market. Hong Kong listed shares in Alibaba rose 7% in Monday trade. The judgment pending for Alibaba was by far the largest regulatory overhang for the broader Chinese tech ecosystem, and the apparent resolution here should allow the sector some breathing room. While US and Chinese regulatory mechanics are different, the recovery seen in US share prices following previous US regulatory judgments suggests international investors can quickly move past record settlements when presented with strong fundamental growth. We retain a positive view on China digital economy companies over the medium term. More on China and Asia equites here.

•Airbus's new orders point toward normalization. European aircraft maker Airbus has delivered 125 jets to its customers in the first quarter, three more than during the same period last year, while it received 39 orders for new aircraft. Although the number of cancellations due to the pandemic has remained quite high, resulting in a net new order decline of 61, we view the fact that airlines are once again placing,new aircraft orders as an indication that travel patterns as well as the global airfreight business may be starting to normalize. For instance, the UK, which is already well advanced in its vaccinations program, is considering introducing a traffic light system allowing international travel to resume from 17 May. While business-related travel is likely to remain low this year, as companies may make greater use of video conference calls, we believe this should be largely offset by pent-up holiday travel and tourism demand, thereby contributing to a swift economic rebound.

Appendix

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