Over the past couple of weeks the Coronavirus Outbreak has been front and centre and causing uncertainly in the global markets. I’m closely monitoring the impacts to global financial markets from the outbreak in China, and other parts of the world.
I attached a great article from China Asset Management Co., one of the largest asset managers in China, who is in the center of it all and is assessing the coronavirus. They have conducted thorough research comparing the coronavirus to the 2003 SARS outbreak. Attached is their perspective on potential developments and economic impact of the coronavirus.
Summary of attached piece:
· We estimate that this coronavirus can be contained by the end of March or early April
· The consequences stemming from the coronavirus may be similar to SARS in 2003
· Growth in gross domestic product (GDP) in the first quarter 2020 will be negatively impacted by the economic disruption from this coronavirus
· SARS – We found that China’s GDP growth in the second quarter of 2003 slowed by 1.7%, but still achieved 9.1% growth on a year-over-year (y-o-y) basis (whereas y-o-y growth in the first quarter of 2003 was 10.8%). In the third quarter of 2003, GDP recovered to 10% y-o-y growth, when SARS had been essentially contained
· Both the A-share market and Hang Seng Index began to rebound on April 28 2003, two weeks ahead of the clear sign of SARS improvement
· If the coronavirus is roughly the same scale as SARS, we estimate that China A-shares and the Hang Seng Index may stabilize later next week
I also thought the slide below would be helpful and offer some perspective why I believe this event is transitory and therefore it’s a buying opportunity. Below is a highlight of past epidemics (for eg SARS) and the analysis shows how markets have “snapped back” after epidemics, going back to the 90s:
Above all, I believe investors should not give into fear but focus on their long term goals. I put strong emphasis in a disciplined investment process, including that your portfolio is well diversified (by companies, industries, sectors, geographically, to name a few) so it can be uncorrelated to broad market risks, and look for every opportunity to position your portfolio for long-term, sustainable growth.
I hope this helps with all the uncertainty.
If you have any questions, please let me know.