While markets were recovering broadly the start of this year, it went into another tailspin due to the Wuhan Virus. In this article, I just wanted to share some thoughts I have on the current situation from talking to friends and the news.
The outbreak of the coronavirus started in Wuhan, China and it has slowly spread to 18 countries globally and counting. Furthermore, having coincided with the Chinese New Year period, which is the peak travel season in China where everyone would be travelling back to their hometowns, this has resulted in the spread of the virus to be even more severe.
The Johns Hopkins Center for Systems Science and Engineering has built and is regularly updating an online dashboard for tracking the worldwide spread of the coronavirus outbreak that began in the Chinese city of Wuhan. Lauren Gardner, a civil engineering professor and CSSE’s co-director, spearheaded the effort to launch the mapping website on Wednesday. The site displays statistics about deaths and confirmed cases of coronavirus, across a worldwide map.
Having spoken to quite a number of friends and read numerous articles on this matter, the only thing I can conclude is that things seems far worst that what it is we may be reading. While it is quite difficult to determine how the situation may develop from here, I thought I share some historical facts and figures to get a sense of how things may unfold here on out. Some things that are certain would be the negative impact on economic growth and asset prices in the short run but recovers shortly after the virus is under control.
Historical Facts & Figures
The figures shown for the Wuhan Virus (2019-nCoV Coronavirus) is not updated to the latest numbers. The current confirmed cases is approximately 4,474 and the deaths reported is 107 translating to a 2.4% fatality rate. Of course, I do understand that this is assuming the data reported is accurate.
Furthermore, using SARS as a reference, one will realise how the different industries started recovering after the outbreak is of diminishing concern. This is the same for the tracking of the index performance as well. As to why the Shanghai Composite Index was increasing during the ‘Risk Rising’ phase, I cannot say for certain. However, one thing for certain is that within a span of 2 months (Stabilisation + Risk Declining phase) the recovery of the indexes was close to or far greater than the decline in performance during the 6 months (Risk Rising phase).
Having been investing since 2012, I have seen numerous ups and downs in the market. While I will not profess that it is a very long experience; however, one thing I can say for certain would be how things eventually will pass.
- 2011: The first ever downgrade in the history of the United States of America of its credit rating from AAA to AA+ by Standard & Poors
- 2013: Meltdown of Singapore listed Asiasons Capital, Blumont Group and LionGold Corp which lost S$8 Billion in just three days of trading
- 2015: The inflation of the Chinese stock market bubble, and its subsequent crash. More than 30% of the value of the A-Shares listed on the Shanghai Stock Exchange was lost in less than one month
- 2015: The stock market rout during the month of January 2016. The Hang Seng Index fell over 35% to 18,319 in February 2016 from the high of 28,442 set in April 2015
- 2016: The Shanghai Stock Exchange also fell close to 25%, from 3,539.18 to 2,655.66
- 2018: Escalation of US-China Trade Tensions
- 2019: Hong Kong Protest
I remember sharing during the ShareInvestor 2020 Outlook event during December 2019 and writing a review on it here, on how the Hong Kong Situation would eventually subside and knowing how to position ourselves is critical. If we were to fast forward to today, while there may still be some small pockets of protest still happening in Hong Kong, the intensities have fallen and we enjoyed a brief period of calm before it got disturbed by this Wuhan Virus.
Perhaps taking some time to review our portfolios and rotating out of some lower quality names to take advantage of any high quality names that may have declined due to this virus outbreak would be my opinion. In the meantime, do keep yourselves healthy and have a Happy Lunar New Year!
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