China’s markets are reeling from the economic ramifications of the coronavirus.
With more foreign institutional investor capital allocated to the region than ever before, investors can do little else but wait to see whether the outbreak will merely cause a blip on their trading screens or if the virus will continue to spread. On Monday morning, the opening of markets got ugly fast, with thousands of stocks recording losses and the majority of those hitting the exchange’s down limit. Overall, the CSI 300 index closed out the day down by almost eight per cent.
But an outbreak like the coronavirus isn’t a reason for institutional investors to change their views on China going forward, says Andy Rothman, an investment strategist with Matthews Asia.
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“There’s still a tremendous amount of uncertainty about what’s going to happen next. Even the medical professionals don’t really know much more about how this is going to go. But I think the fact that everybody is taking this very seriously right now is a good sign. It’s good for governments and health professionals to panic a little bit because it means they’re working really hard. But I don’t think the rest of us need to panic.”
Of course, the longer the disease lasts, the bigger impact it will have on China’s economy, he says. But nothing indicates the outbreak will be any lengthier than previous global health scares, and the vast majority of fatalities have been in Hubei province, home to the city of Wuhan where the outbreak first began. “That to me is a positive sign that this isn’t expanding geographically in a very dangerous way,” says Rothman. “There are cases all over the world, but they’re small in number.”
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China is certainly making an effort to demonstrate its competence, he adds, noting Chinese state media’s decision to livestream the emergency construction of new hospitals in Wuhan is meant to project they’ve got the situation under control. And the overall government response, barring some serious mistakes made by local officials in Wuhan, has been a significant improvement on how the country dealt with the spread of the avian flu and severe acute respiratory syndrome.
The global community is also better prepared for these types of outbreaks, says Rothman. Whereas it used to take months to sequence the genome for a virus like this, it was just about a week for the coronavirus.