First messages about an unknown virus disease outbreak in the Chinese city of Wuhan appeared in December. The world did not pay much attention to what was happening there, keeping the focus on the ongoing dramatic trade tensions between the US and China.
However, the virus kept expanding, and the markets have been in panic since early 2020. The S&P 500 correction reached 3.5% in January. The stock sell-offs were accompanied by reports of the first deaths and the unexplored nature of the virus.
What Is Happening Now?
More than 60 thousand people became infected with the coronavirus at the time of writing. Cases of the disease were recorded in more than 20 countries, and China ended up in forced isolation.
The first decade of February brought some optimism. First of all, because most of the people infected with the virus recover. Strong immunity can successfully resist the coronavirus. The only threat is possible complications.
The scientists’ reports came in handy for the oil manufacturers. The black oil plunged more than 24% in January. Stock markets did not react to OPEC’s verbal interventions about the cartel’s plans to reduce output in order to stop the decline.
Will the Coronavirus Affect the Market?
The situation is unlikely to worsen as all countries are actively collaborating to prevent the virus from spreading. So, the situation should not be seen as a source of fear and crisis but as the one that will be normalized.
From this point of view, the epidemic or, rather, its liquidation will significantly strengthen the assets. First of all, because China will restore its production capacity and resume economic activity.
However, we do not rule out that the virus is going to have a long-term impact on the markets. For example, when China releases its GDP. The forecasts of Chinese government economists recently discussed on the Internet said the GDP is likely to come in at 5% in 2020.
Among potentially profitable assets in the short term, we can distinguish oil, the Hong Kong Hang Seng index and the Japanese Nikkei 225. Let’s consider them in more detail.
The list of key boosters for oil growth includes normalization of the situation in the Middle East, stock market recovery, the end of the impeachment trial of US President, and positive data on economic activity in Europe.
The Hong Kong stock index turned out to be one of Asian instruments that plummeted most in 2019. It was caused by the non-stop protests in the city. Experts even said it was possible that China’s central authority might have suppressed the conflict by force.
The US passed legislation aimed at protecting democracy in Hong Kong, showing that it was ready to oppose China. To sum up, we can say that the situation in Hong Kong is getting normal and a rise of Hang Seng is worth making money on.
The Japanese investors first reacted to what was happening in Wuhan, that is one of the reasons for selling off Nikkei 225. Those days, investors were talking about the repetition of the situation caused by the outbreak of atypical pneumonia in 2004.
But investors have already taken advantage of the Nikkei drop, and we would not have added it to our digest unless the head of the Bank of Japan did not make the statement, which made us think about the following things.
The Land of the Rising Sun is known as the world’s creditor due to its low interest rate. However, Japan reached the point that even the negative interest rate value does not make the economy grow. In the current situation, the Bank of Japan will have nothing to do but to lower the rate, which means that the bullish trend will continue.