Discuss the impact of deadly Chinese pneumonia on world markets and the economies of countries can mainly be in the format of assumptions. For accurate forecasts, there is still not enough information about the disease itself: the extent of quarantine, the spread of the virus, the success of existing methods to combat it.
How did past virus outbreaks affect the stock market?
If we study the dynamics of markets during global outbreaks of various diseases in the past, we can decide that for the economy viral epidemics are a positive phenomenon.
For example, America’s stock market has been growing for about a year after the outbreak. Moreover, growth volumes are higher than historical averages. In the first month, a moderate adjustment is usually observed, but after 4-5 months there is a significant increase.
If we talk about a longer period, then even the largest-scale “viral catastrophe” of the new history (Spanish flu) could not lead to negativity in the stock market.
Thus, according to historical statistics, Chinese pneumonia is likely to have only minimal negative impact on the FR, and investors can not abandon the usual trading strategy. Especially if they work outside of China.
Whose career is under attack?
The victims of the coronavirus were not only specific people, but also air carriers. Of course, companies from China suffered more than others. A few examples:
- Lufthansa (Germany) – the decline was 4%;
- Air France (France) and American Airlines (USA) – 5% each;
- Air China (China) – over 14%.
As for the Russian Aeroflot, at the auction on the Moscow Exchange, the airline’s securities became cheaper by about 5%. This indicates a loss of capitalization in the corporation of approximately 6.3 billion rubles.
China is the main buyer of domestic goods. In 2018 alone, the country brought the Russian economy more than $ 100 billion (twice as much as, for example, Germany). About 50% of the money comes from the sale of petroleum products and oil. Therefore, in Russia, Lukoil, Gazprom, Rosneft and other energy “sharks” are in the red.
Since the beginning of 2020, oil quotes have fallen by more than 12%. The situation did not change even despite the announcement of force majeure on Libyan supplies (production decreased almost 4 times). The situation has not improved even after the OPEC intervention (now not only the extension of the agreement on oil production restrictions, but also the possibility of further reductions is not ruled out).
For reference: world stock markets (the exception is the PRC market) initially “did not pay attention” to the command of Chinese pneumonia. They changed their attitude only after the Americans appeared on the list of infected citizens.
Confidently falling shares of casinos in China’s Macau, air carriers, travel agencies, enterprises whose activities are associated with oil and oil production. At the same time, the value of securities of manufacturers of antiviral drugs is growing. In particular, the share price of Novavax, Abbvie, Bayer, AstraZeneca and others.
What should Russian investors expect?
Some global economies will indeed face the fact that the Chinese virus will have a noticeable adverse effect on stock markets. However, do not forget that the Russian economy does not depend so much on the stock market (the general indicator of capitalization on the stock market is relatively low, domestic corporations do not get a lot of money from it).
On the other hand, the sale of securities cannot but be sensitive for investors. The sale will result in a depreciation and, as a result, a decline in stock prices, losses for investors remaining on the market.
Drivers for the growth of shares of Russian companies:
- Confident uptrend;
- Soft financial and credit policy of the world central banks;
- Macroeconomic stability and the declining key rate of the Central Bank of Russia;
- Underestimation relative to P / E averages;
- Significant dividend yield (6.5%).
Thus, most likely, the situation in the Russian stock market will be able to stabilize: the “cons” factors will be offset by favorable drivers.