A few days ago, no one knew what it was, and currently the Wuhan Coronavirus becomes one of the main topics of the day. Its unusual and abrupt appearance has put the Chinese authorities and the entire world in check. All this nervousness has affected stock markets around the world, with each news that appears. Is the Coronavirus Really an Epidemic to Fear? Why are the stock markets suffering the declines of the last few days? Are the drops in contributions really related to the new disease?
We are all waiting for the evolution of the epidemic, and it is that its spread is very fast. Although not much was known about its nature, authorities have gone to work to stop its advance. Thus, the first signs are beginning to be seen to understand how it works, and thus to be able to take better control measures. The fear, however, comes this time in the conditions that surround the Coronavirus, and above all from the location where it has occurred and the moment that coincides with the Chinese Lunar New Year. It is just a moment where there are many millions of national and international displacements. An epidemic with a nature that makes it different this time.
What is the Wuhan Coronavirus?
The Wuhan Coronavirus belongs to the Coronavirus family, a large group of RNA viruses with a common viral envelope. To date there are 39 different types of Coronavirus, of various types of infections depending on which one is. Some with milder symptoms like the common cold, others like bronchitis, bronchiolitis, pneumonia, Middle East respiratory syndrome (known as MERS-CoV) or severe acute respiratory syndrome (SARS-CoV).
Wuhan Coronavirus (2019-nCoV), very reminiscent of the SARS epidemic of 2002-2003. Arnau Fontanet, head of the department of epidemiology at the Pasteur Institute in Paris, said that the new virus 2019-nCoV is 80% genetically equal to SARS. This comparison has led to the conclusion that perhaps it could be a SARS mutation.
In addition, it was said yesterday that it had the characteristic that it is contagious even before the symptoms begin to show. However, it has recently been denied, which gives an aura of certain ignorance and continuous study to understand the operation of the disease.
Evolution and expansion of the epidemic
There is concern that it could spread on a global scale, that China may not contain the virus and cause a pandemic. To understand the magnitude of the matter, just look at the data that is obtained day after day. Among the most relevant, the following should be highlighted:
- The number of confirmed cases went from 220 to 2.850 in a week. Multiplying by 13. This was as of yesterday, Monday, January 27, currently today, the 28th, at the time of writing these lines, there are already 4.500 infected.
- The number of registered deaths went from 3 to 81 in a week. Multiplying by more than 25 times. This on January 27, today, Tuesday 28, the figure of 106 deaths was announced, 25 more than yesterday. The last number of people cured has been 60.
- The WHO yesterday rectified a report in which it raised the international risk from "moderate" to "high". At the national level of China, the risk rating is "very high".
- There are 44 documented cases outside of China of people who have contracted the disease. Among the different countries we find Singapore, France, Germany, Australia, Thailand, Malaysia, South Korea, Japan, the United States, Vietnam, Nepal and Canada.
- The president of the USA, Donald Trump tweeted yesterday that assistance is being offered to China to contain the virus.
What sectors are being harmed the most?
Given the measures to contain the epidemic that are being adopted by governments, different companies begin to register strong stock market declines. Investors, driven by fear of the evolution that the Wuhan Coronavirus may end up having, are rapidly shedding the shares. Among the most affected sectors we find hoteliers, luxury hotels, airlines, and certain raw materials. If not, all for a general suffer declines, the most pronounced we would find among those previously mentioned.
The economic slowdown that is already beginning to be noticed, is transferred to these sectors. Meliá, with its 5 operating hotels in China, indicated that its occupancy is low, while its shares registered a 5% drop yesterday. On the other hand, airlines continue today with declines, with a little more moderation compared to the black day they suffered yesterday. Companies such as IAG acknowledge having made the rates of their Iberia flights to Shanghai more flexible.
What to expect from the impact of the Coronavirus in the markets?
Various experts and financial analysts have wanted to emphasize that the impact on the economy is still quite unpredictable. Not for this reason, there are different assets that by their nature can have a better performance, such as electrical or pharmaceutical ones. Also safe haven assets, such as Gold and Silver, are performing some increases in view of that capital that is taking profits and seeking refuge. And it is that we must not forget that there is a great general upward trend in recent months, where markets seemed to rise without fear of any repercussions on corporate profits. Markets at historical highs in the case of the USA or annual highs in the case of Europe.
The levels at which the prices have reached, with demanding multiples, are high enough so that any eventuality affects the markets in a sensible way.
We will have to wait to see the evolution and the way in which the disease is faced. Starting to take positions on this can be subjective, and in turn hasty. Maneuvering in these cases requires great anticipation and reaction capacity. Likewise, different experts and analysts have also recalled how in the past when other viruses appeared, such as SARS, once they were controlled, there were good stock market recoveries. Meanwhile, in return, some of them also remember how stocks fell during the next few months.