Coronavirus: Impact on Investments

News of the outbreak of a novel coronavirus, currently dominates global headlines. The coronavirus is said to be linked to a large seafood and animal market, suggesting that it originally spread from animals to humans. However, a growing number of patients have not had exposure to such markets, which indicates that there is now person-to-person infection.

The World Health Organization on Tuesday proposed an official name for the illness caused by the new coronavirus: COVID-19. The acronym stands for coronavirus disease 2019, as the illness was first detected toward the end of last year.

Corona Beer will urge consumers to use the new name as misinformation spread by social media users that mistakenly links the Mexican beer brand to the deadly China coronavirus.

The latest figures of the virus brought the total number of deaths in China to at least 1,113. And the total number of confirmed cases rose to 44,653. With 99 percent of cases in China, this remains very much an emergency for that country, but one that holds a very grave threat for the rest of the world.

Here in South Africa, we feel safe for now, but what impact will it have on my investments?

It has the potential to snowball as not all countries have the means to take the serious and large scale actions that China has taken.  The knock-on effect on tourism is already felt with 100’s of flights being cancelled and loss of production in China. There is also disruptions in every other major industry, from food and fashion to automobiles and technology. And there is no sign that the economic impact is about to ease up.

Historically, the impact of disease-related events on global markets have been temporary. The Coronavirus is being compared with 2003’s SARS outbreak, which also initially occurred around Chinese New Year and was stopped by July 2003. At that time, Chinese and other Asian markets declined as SARS spread, although these markets bounced back once SARS was contained.

The likelihood going from past experience is that markets could react sharply, albeit temporary, to news about the virus in China and elsewhere, until it stops spreading. Asian markets will likely bear the brunt of the impact, while US markets will be less impacted unless the virus proves to be far more deadly than is currently believed to be the case or if infections spread to large numbers of people.

We already derisked our portfolios and locked in some profits after a positive 2019.

We will monitor the process closely and will adjust the portfolios accordingly.

Let us know if you have any further questions.

PJ Botha CA(SA)

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