A few things to consider
Markets are increasingly tuning into the risks around coronavirus. It's taken equity markets awhile but the S&P 500 fell back below 3300 and to the lows of the week.
Some things to consider:
- Infections models say Saturday is the day when many more people should start showing symptoms in China
- China is closing movie theaters and Shanghai Disneyland is being closed. Officials say the threat is contained but actions speak louder than words
- An increasing number of cities are being placed on lock-down
- This is the busiest travel time of the year in China
- Cases and suspected cases are emerging all over the world at a much higher pace than SARS
- The virus appears to have a two-week incubation period according to Dr. Nancy Messonnier of the Centers for Disease Control and Prevention (vs SARS at 2-7 days)
- It's cold-and-flu season which complicates diagnosis and puts an additional burden on the healthcare system, also leaving people more susceptible and weakened
There is certainly an element of FUD out there and I risk being accused of spreading more but the question is whether the FUD will get worse before it gets better? On that front, I have a hard time believing that we don't see at least another week of spreading fear. People have been traveling extensively out of Wuhan until the past few days.
During SARS, H1N1 and ebola the fears peaked 2-3 weeks after mainstream media coverage began. At best we're halfway there.
To me this is a perfect storm in a market that's already frothy.
SARS in 2003 cut Chinese GDP by 0.8-2.0 percentage points and east Asian by 0.5 pp. Consider:
- Chinese outbound tourism has risen 8-fold since 2003
- China is a much bigger chunk of global GDP and demand
- In 2003, China never fully shut down a city like it has in Wuhan
The good news is that SARS resulted in better emergency planning for an outbreak like this but is it enough?
