Thu. Apr 9th, 2020

Coronavirus drives away investors

The effects of the famous virus with Chinese origin have also been noted among investors. The concern that the coronavirus can spread globally has caused a slowdown in the risk apparatus of investors. Although the World Health Organization (WHO) has clarified that the outbreak is only an “emergency in China,” many prefer to protect themselves from instability. The Swiss bank Julius Baer recommends investing in sectors linked to medical care and internet, which are less exposed and could offer investors some downward protection. Pharmaceutical companies are the best bet since they can benefit from the spread of this virus, say experts from IG Markets Spain. “We are inclined to buy for weakness in the stock market at this stage,” said Mathieu Racheter, strategist at Julius Baer.

Since the first detection, several stock indexes, such as the CSI 300 and Hang Seng, have fallen 3.6% and 3.9%. According to estimates by IG Markets, investors are waiting for the publication of activity data and they take positively that the ECB will continue to keep rates low. In the short term, Julius Baer has argued that the Chinese stock market could remain volatile in the event of a further deterioration of the epidemic, especially because of the risk involved in tourism generated by the Chinese New Year. “In the case of further deterioration of the epidemic, populations linked to tourism and consumption will be the most affected,” said Julius Baer’s head of research, Christian Gattiker.

The Transportation and leisure activities in shared spaces will be the most affected since the coronavirus is spread like any other cold virus, through coughing and sneezing. WisdomTree’s director of analysis, Aneeka Gupta, points out that “airlines such as China Southern are more likely to be exposed, since they represent the largest market share (38%) by seating capacity”. Consumers will choose to stay at home, so the epidemic is likely to adversely affect stores, parks, restaurants and cinemas. By avoiding crowded places, Food distribution, packaged food and food retailers will be the most benefited for the cautious behavior of citizens.

The outbreak will not harm the prospects of increase long-term of the Chinese economy during 2020, or so the Wisdom Tree analyst expects. Of the 74 companies in the most important stock index in the United States, the S&P 500, 67.6% have exceeded expectations. Chinese markets have remained closed for the Chinese New Year, so the references of the Asian giant are unknown. On the other hand, Japanese stocks ended up a bit higher in a session in which investors bet on pharmaceutical companies, reports IG Markets. The new coronavirus is 80% similar to the acute and severe respiratory syndrome virus (SARS) that caused an outbreak between 2000 and 2003 although its damage was greater. The SARS outbreak killed 773 people and led to a 15% reduction in market indices at that time. However, the mortality rate of the coronavirus is lower, of 26 dead of the 887 infected. In Spain, Health has ruled this Friday the two cases under study in Spain.


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