February 2020
WHO declares the Novel Coronavirus as a global health emergency
As of February 3rd, there are 17,408 confirmed cases of the Novel Coronavirus (2019- nCoV) with 362 fatalities to date. China currently accounts for 99% of the cases worldwide, with the epicenter in Wuhan. However, the virus has spread to 26 other countries and the number of confirmed cases grows rapidly. The fatality rate of 2-3% is less severe than the 10% of the SARS virus or 35% of the MERS virus, but is higher than the 0.1% of seasonal influenza.
Experts believe the Novel Coronavirus will peak within 1 - 4 months
According to Zhong Nanshan, the Chinese pulmonologist that discovered SARS coronavirus in 2003, the outbreak will reach its peak in early February. Other infectious disease specialists indicate that a peak would occur in April or May. The development of vaccines likely takes 3-4 months. However, clinical trials would push the timing out to a year before a vaccine is deemed safe for use. China’s New Normal: Caution in “Coronaverse”
Impact on capital markets
The short-term capital market impact has been a drop in the markets from their respective highs this year in mid-January after the signing of the US-China Phase 1 trade agreement. The Dow Jones and Stoxx 600 indices declined between 3-4% and the Shanghai composite index dropped 12% as of February 3rd, after an extended Chinese New Year holiday due to the coronavirus.
Analysts compare this outbreak to the SARS epidemic. SARS caused a significant drop of around 9% in the Shanghai stock index within six weeks after the first case was reported, after which it recovered its value completely after an additional two weeks.
Likely, the Chinese stock markets will decline further and experience volatility in the next days. Likely, travel-related (e.g., airlines, hotels) and consumption-related stocks (e.g., shopping, restaurants) may take a severe hit. Pharmaceutical companies and healthcare related companies (e.g., vaccine makers, hospitals, mask manufacturers) are likely to be impacted less and even benefit from the crisis. If you have any remaining questions, please do not hesitate to contact us anytime.