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Presently, we are reminded of the Oracle of Omaha, Warren Buffett’s famous saying-
A pandemic with its epicenter in Wuhan City of China has been the hottest topic across the globe. Not only has it spread to every continent except Antarctica, quarantined a number of patients and claimed over 3.8k lives as on 9 March 2020, we are living in times where the virus has over a lakh confirmed cases, and not one concrete medication!
Repercussions have not been limited to health and economy, their share markets are bleeding, and a market bloodbath has been recorded on the Australian Securities Exchange (ASX).
The Australian share market just shed more than $136 billion, starting the week of 9 March 2020 on a nervous note, demonstrating the rising fear of the COVID 19 outbreak. What worsened the scenario was an oil price plunge of over 20 per cent. Together, these events brought forth one of the nastiest mornings since the global financial crisis (GFC) of 2008-09.
Let’s unfold today i.e. 9 March 2020 stark share market reality in Australia-
ASX Performance- Worst Session Since GFC?
After the close of the trading session on 9 March 2020, the S&P/ASX 200 went downhill by 455.6 basis points or 7.9 per cent at 5,760.6. Every sector ended the day in red with energy stocks shattered. The slump was hitting hard on market participants just when the benchmark index demonstrated another worrisome fact for the day-
There were merely 3 stocks that traded in the green zone, trading higher-
- Fisher & Paykel Healthcare Corporation Limited (ASX:FPH) was the top gainer of the day, up by 2.98 per cent and quoted $ 25.200
- FPH was followed by Newcrest Mining Limited (ASX:NCM), up by 2.54 per with the stock priced at $29.82
- Spark Infrastructure Group (ASX:SKI), the third gainer for the day was up by 0.48 per cent and quoted $2.08.
What Propelled The ASX Slump?
With a sea of red across the ASX board on 9 March 2020, it was quite evident that investor sentiment has been taking a downward spiral and nervousness has not only been prevailing but deepening by the day.
The downward trend has been majorly driven by virus fears, though the oil price dive was quite instrumental in it. Fund managers have been instigating that there was a sense of fear and panic when the markets opened in the morning and were perhaps one of the firsts to absorb the shocking fall in oil prices. But why this nervousness besides the one being spewed by the COVID 19 outbreak?
The Russians have backed off on agreeing with their OPEC counterparts from cutting crude oil production amid softening oil demand driven by economic obstacles. Reacting to Russia’s decision, Saudi Arabia lowered its oil prices in a bid to gain a slice of market share from Russia.
As usually happens during such crisis times, safe haven assets like gold are peaking. The shimmery metal recorded highs and reached almost $2545 per ounce at around market close.
What to Expect in the Days to Come?
Economists opine that the Australian economy might slide into a recession (which has not occurred in over three decades), if the coronavirus continued to impact its supply chains and hard hit almost all sectors, from mining to tourism.
Economic policies, low interest rates and the ability of investors to hedge against market volatility will be put to test in the coming days.
However, with summer season around the corner for major part of the world that will cause a temperature rise, which supposedly will deplete this outbreak, at least there might be a drop in cases of COVID 19.
Moreover, the Government’s plans and fiscal measures to remediate the virus’ economic impacts could provide some cushion to the markets. Lower tax rates should also be considered by the Morrison government.
Bottomline
One should note that there have been around 62k recoveries in COVID 19 cases across the world, a number a little above 50 per cent of confirmed cases, which seems quite encouraging in the wake of the fear we are engulfed in. The world is hoping for a silver lining in the form of more containment efforts and precautionary measures to help safeguard global prosperity.
Amid this ongoing mayhem in APAC’s most active share market, the long-term investing strategy, one that the best of the best swear by can be considered. Markets are dynamic and the bear and bull fight will keep happening. But stock selection and market vigilance during these times should be rationalised well, as some deals that might make one nervous now could actually pay off well in the future.
The looming fear of recession is likely to have reached the Morrison office and measures to counterattack it could bear sweet fruits, a direction that will be clear once announcements are out from the Prime Minister Office.
