Coronavirus will hit markets, but don’t jump the gun, investors advised | Fin24

Coronavirus will hit markets, but don’t jump the gun, investors advised

Jan 27 2020 17:18
Khulekani Magubane, Fin24

While the latest coronavirus is the biggest current threat to the financial markets, investors should avoid making rash decisions based on its rise in provinces of China and parts of the United States, according to DeVere Group CEO and founder, Nigel Green.

The new coronavirus, dubbed novel coronavirus (2019-nCoV), has claimed 81 lives and infected almost 3 000 people. Of all the cases, 44 were detected outside China.

During the course of Monday, the European Stoxx 600 fell by some 2%, as did London's FTSE 100; while Germany’s Dax dropped 2.5%. 

The slump followed a what had been a similar decline in Asia overnight. On Monday morning, the Shanghai Composite had fallen 2.7%, the Hong Kong Hang Seng had lost 1.1%, and Japan’s Nikkei had dropped 2%.

Green said whilst the health crisis would hit some sectors, including travel and retail, most investors who have a properly diversified portfolio should avoid knee-jerk reactions as these issues tended to have a short-term impact on markets.

"The coronavirus is the number one threat to financial markets currently as global investors are becoming jittery on the uncertainty," said Green.

Green said investors should monitor the situation with their financial adviser and consider a "defensive approach" if the following week gives much higher casualty rates.

"However, the cost and effort of making such a switch means you do not do it lightly, and more evidence is needed that the virus does pose a medium to long term risk to China and the global economy," Green said.

Green said the crisis should serve as a wake-up call to all investors to ensure their portfolio is well-diversified across asset classes, regions, sectors and currencies.

In a snap note on Monday, TreasuryONE said markets started the new trading week on a risk-off footing, as the virus continued to unnerve investors, sparking a flight to safehaven assets. 

"Wall Street closed lower on Friday with the S&P down 0.90%, the Nasdaq down 0.93% and the Dow down 0.58%. Chinese markets are closed for the Lunar New Year holidays today but the Nikkei is down 1.86% this morning and US futures are trading lower," TreasuryONE said.

Gold - which reached a two-week high on Monday - was trading up, TreasuryONE noted, but platinum and palladium were lower, and oil fell to $59.30, with metal prices like iron ore trading weaker as markets assessed the impact of the virus on the Chinese and global economies. 

Thailand's stock market tumbled on the prospect of economic turbulence after China banned outbound group tours to fight the spread of the novel coronavirus that’s sickened thousands of people, Bloomberg reported earlier in the day. 

The SET index slid 2.9% on Monday, the most since 2016, the agency reported, with tourism shares among those bearing the brunt of the drop. The baht weakened in line with emerging-market currencies on concern about the fallout from the virus.

There had been 8 cases confirmed in Thailand.

china  |  wuhan  |  thailand  |  coronavirus


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