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East Asia outlook is ‘quite good’ relative to other regions slammed by coronavirus, JPMorgan says

A medical worker prepares to check the temperature of an AFP photojournalist before a COVID-19 coronavirus test in Wuhan in China’s central Hubei province on April 16, 2020.

HECTOR RETAMAL | AFP via Getty Images

East Asia could do better than other parts of the world as the coronavirus pandemic leaves many major economies virtually frozen, according to David Kelly, chief global strategist at JPMorgan Asset Mangement.

“I think the overall outlook for East Asia is quite good relative to to other regions of the world … in economic terms and probably in market terms in the second half of 2020,” Kelly told CNBC’s “Squawk Box” on Thursday.

Global economic activity has plummeted as authorities implement extensive social distancing measures and lockdowns to stem the spread of the disease. But Kelly said places such as South Korea, Taiwan and Hong Kong have a better chance of “escaping from Covid-19 than Europe and the U.S. does.”

The strategist also said China, where the virus was first reported late last year, is likely to keep reopening its economy as it takes a different approach from the West.

“It may be that while the U.S. and Western countries will shy away from achieving some sort of herd immunity and wait for a vaccine, it could be that China may soldier on with reopening the economy even if there’s some rise in the case load and they will sort of struggle to try and dampen down that growth but not abandon this reopening of the economy,” Kelly said.

Investors have been closely watching data out of China, looking for insight on the magnitude of the disease’s economic impact. The country is set to report its first-quarter GDP on Friday.

Analysts polled by Reuters expect China’s GDP to have fallen 6.5% from last year, a sharp drop from the 6% growth recorded in the fourth quarter of 2019. That would also be the first quarterly decline since 1992, when China began reporting GDP, according to Reuters.

‘Pretty rough road’ ahead for the US

Kelly also said he expects a “big drop” in second-quarter GDP for the United States, which saw a spike in coronavirus cases and shutdowns beginning in March.

“I think first quarter GDP will now be negative in the U.S., but second quarter GDP could be down 20 to 25% in annualized rate,” Kelly said. “A huge decline.”

While daily new cases in the U.S. have stabilized due to an “extraordinary pattern of social distancing,” the strategist was wary about lifting prevention measures soon.

“If you reopen the country to back to where it was before, the virus will take off again,” he said. “It’s still gonna be a pretty rough road for the United States until there’s a vaccine hopefully in the first half of 2021.”

Kelly projected the U.S. economy is likely to see a U-shaped recession of “a big fall, a big stall and then a big surge in 2021.”

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