Income investors in developed stockmarkets could face very tricky conditions this year, with UK and European markets experiencing hefty dividend cuts.
We think that Asian markets are better positioned to provide some income shelter. This is in part because many Asian countries were better prepared post-SARS.
They tended to be swifter to contain the virus - with potentially less economic damage - and were quicker in re-opening their economies. This should mean that earnings are less affected than in Western economies.
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Dividends should also be more resilient. Ratios of Asian dividend payments out of earnings were already at a lower level than in other regions prior to the crisis; this means that they are less vulnerable to reductions from companies looking to conserve cash.
There is also less pressure from governments in Asia to withhold dividend payments compared to Europe, for example.
Furthermore, Asia's dividend culture is such that a large proportion of 2020's dividends are likely to be based on fairly strict application of payout ratios to 2019's earnings.
Since Covid-19 lockdowns will affect 2020 earnings, we probably will not see as much dividend impact until 2021, allowing time to make portfolio shifts if necessary.
While we think Asian earnings will show some overall resilience to Covid-19 when compared with key developed economies, there will still be varying fortunes within the region.
China is one of the lower-yielding parts of the region on average - as shown by the 2.0% yield forecast by JP Morgan. But its scale means that it accounts for a large chunk of the income opportunities in Asia; around a quarter of dividends in the MSCI Asia Pacific ex-Japan Index come from China.
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Within China there are plenty of ways to capture what we see as the sweet spot for Asian income investing: intermediate dividends with long-term growth and attractive valuations.
Given the poor short-term outlook for developed market economies - particularly for consumption - we think the best opportunities are in domestically oriented businesses that are exposed to (increasingly self-sustaining) intra-regional growth.
Risks remain of course, including new outbreaks of Covid-19 - as shown by the recent cluster of cases in Beijing that appear to centre on a wholesale food market.
