AUS
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CA
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Since the virus has broken out of the epicentre into many countries now, the incumbent countries, whose citizens have been infected by the deadly virus, are facing detrimental consequences as the virus-hit toll reaches higher levels in their respective countries.
Particularly South Korea, Iran and Italy, where the spike in the number of cases was quite drastic that has raised significant concerns around the globe.
At the backdrop of increasing number of cases in new jurisdictions – safe haven assets, especially gold and high-quality bonds – have seen their prices skyrocketing this week, while global markets shrugged-off their respective highs.
The AU 10-year bond yield has dipped to a record low of 0.845% today, down from January high of 1.41%, after ABS released disappointing fourth quarter capex data, down by 2.8% as against market expectation of 0.5%.
S&P ASX 200 closed 1% down as 2020 record highs are wiped out.
Do your due diligence, believe in your process
If your investment process is more skewed towards wagering and luck, this may not the best time to put your money to work, as there are substantial downside-risks in investing amid a growing pandemic.
Presently, the situation is quite complex having numerous implications, depending on various outcomes. Of which, the most complicated has been the duration of this outbreak, which appears to be unknown at the moment.
The magnitude of economic damage is likely to be felt in the first-quarter of this year, as China has been largely stalled over the past month now. A month’s production loss and revenues loss could dampen the cashflow forecasts, and firms’ ability to service its debt.
However, this situation, which largely persists in China, could be dealt with adequate policy measures like postponing the debt-repayment schedule of various industries. That said, given the fiscal boldness of Chinese government, it does not seem impossible.
Considering that the virus gets largely controlled in the next month, the underlying fundamentals of many industries haven’t changed drastically, thus providing additional opportunities for wealth creation and capital appreciation.
As we don’t know how long this is going to persist and what would be the situation in the upcoming month or say 14-day period, the conventional wisdom suggests that a watching stance could be better than jumping with the crowd.
Nonetheless, if you believe that your proposed investment has all the characteristics to absorb a recession-like shock, which may include resilient free cash flows, sustainable debt, and a history solid management. Then, you should proceed and believe in your process.
Epidemics and pandemics of the new century
The coronavirus cases have been seen in numerous European countries, including Austria, Croatia, and Switzerland. Northern Italian region has been dubbed as the central point of the outbreak in Europe. In Brazil, a 61-year old man was tested positive for the virus, who had been to Northern Italy.
The neighbouring countries of Italy are running tests on travellers returning from the Northern Italian region. In Spain, a hotel has been locked having around 1k guests on precautionary grounds, as a couple from Northern Italy tested positive for the virus.
In Asia, South Korea remains the major contributor to outbreak outside of China with infected toll at 1,146, as per John Hopkins CSSE. News have emerged that a 23-year old US Army soldier was tested positive for the disease in South Korea.
In Iran, the number of cases reported are a few less than 100, and the outbreak in the country remains a major concern due to its bleak visibility. It was noted that many Shia Muslim pilgrims, migrant workers, travellers have commuted between Iran and other jurisdictions, raising concerns for a potential spike in cases. It is being said that Iran has the propensity to spread the virus across Middle East.
On Tuesday, in the US, the health officials voiced out opinion that the virus is highly likely to spread in the country. It was said that the schools, hospitals, and businesses should prepare for the deadly virus.
They noted that cities and towns should introduce social distancing measures, including smaller classes in school or no classes, work from home for employees, and cancelling meetings and conferences.
US health officials said that the conditions of the coronavirus victims in the country have been showing promising signs of healing, and the patients are getting better. The toll for the US largely comprised of the quarantined cruise – Diamond Princess.
It could get worse before it gets better
When a hotspot like Northern Italy could create an infectious magnitude like this, there could be many more such ‘Northern Italy’ where the commuters are infecting substantial masses of humans, which may be unknown presently.
As the quarantined time is over two-weeks, the spike in the number of cases should be expected every two weeks. However, the health officials in the respective countries are working on their toes to recover the infected masses of humans.
More importantly, the researchers are in a race to find the cure of the disease, and the person who would be inventing the vaccine is likely to be remembered throughout this century, thus creating history.
In an effort to mobilise efforts globally, researchers have been sharing data to tackle the deadly virus. A free website to share research was opened by the China National Knowledge Infrastructure.
