This Friday fall was the deadliest since September 2015

The benchmark indices extended the losses on Friday (i.e. 28 February 2020), falling off the cliff posting the largest single-day loss since September 2015 – the 216.7 points downward move in the S&P/ASX 200 – was indeed deadly.

Now the benchmark index is back to the levels recorded in the August 2019 amid the last earnings season. Looking at the weekly losses, the picture is somewhat similar with some of the steepest falls recorded since the benchmark made debut in 2009.

Figure: S&P/ASX 200 Daily Close (In points)

None of the indices ended the session in the green on 28 February 2020 – the S&P/ASX 200 Information Technology (Sector) ended down 4.94 per cent, the S&P/ASX 200 Materials (Sector) was down 4.89 per cent, S&P/ASX 200 Communication Services (Sector) down 1.4%, and the S&P/ASX 200 Financials (Sector) was down 3.22%.

All new index – the S&P/ASX All Technology Index took a beating of 4.7%.

Even the defensive names across the board lost gains with the S&P/ASX 200 Consumer Staples (Sector) ending down by 3.14%, the S&P/ASX 200 Utilities (Sector) down by 1:01%, and the S&P/ASX All Ordinaries Gold (Sub Industry) lost 10.07% of the gains on a single day.

Market darlings & lofty valuations have been the victims

Unproven business models such as Afterpay Limited (ASX:APT) was down 9.04%, Splitit Payments (ASX:SPT) down 11.9%, Sezzle Inc (ASX:SZL) down 10.81%, Zip Co Ltd (ASX:Z1P) down 10.23%, Cann Group Limited (ASX:CAN) down 8.6%, Cann Global Limited (ASX:CGB) down 8.33% etc.

Companies with exceptional expectations and solid growth expectation such as Wisetech Global Limited (ASX:WTC) down 10.8%, HUB24 Limited (ASX:HUB) down 5.54%, IDP Education Limited (ASX:IEL) down 10.82%, Clinuvel Pharmaceuticals Limited (ASX:CUV) down 10.83%, Mesoblast Limited (ASX:MSB) down 8.19%. Meanwhile, Harvey Norman Holdings (ASX:HVN) was down 14.12% after the results were results.

On a brighter side, the companies that were the top gainers in the index on 28 February 2020 were NEXTDC Limited (ASX:NXT) up 6.33%, Perenti Global (ASX:PRN) up 3.84%, Jumbo Interactive (ASX:JIN) up 2.6%, Steadfast Group (ASX:SDF) up 2.18% and AusNet Services (ASX:AST) up 1.19%.

NEXTDC posted 8% revenue growth in the FY20 half year result, and Perenti Global released the results for its subsidiary to fulfil the disclosure duties of the senior debt listed on SGX.

Looking further into defensive names, APA Group (ASX:APA) was down 1.01%, AGL Energy (ASX:AGL) down 1.89%. AusNet Services (ASX:AST) up 1.19%, Spark Infrastructure (ASX:SKI) up 0.47%, Infratil Limited (ASX:IFT) down 4.22%, Tilt Renewable (ASX:TLT) no change, BWX Limited (ASX:BWX) was unchanged.

Blue-chip companies helped to push the indices to lower levels as major heavyweights posted losses. Woolworths Group (ASX:WOW) down 3.53%, Wesfarmers Limited (ASX:WES) down by 2.89%, Commonwealth Bank (ASX:CBA) down 3.13%, Westpac Banking (ASX:WBC) down 2.83%, National Australia Bank (ASX:NAB) down 3.05%, Australia & New Zealand Banking (ASX:ANZ) down 2.74%,

Macquarie Group (ASX:MQG) was down 3.29%, BHP Group (ASX:BHP) was down 4.51%, Rio Tinto (ASX:RIO) down 3.47%, Fortescue Metals (ASX:FMG) down 6.4%, Newcrest Mining (ASX:NCM) down 8.04%, and Northern Star (ASX:NST) was down 9.23%.

Earnings season augmented with coronavirus uncertainty is powering sell-offs

At the heart of the such wild moves, across the board, are the rapid short-selling activities, algo traders, panic among investors, potential large redemption in funds leading to sell-offs, and as virus-related events unfold – the markets are increasingly dumping risky-assets.

At the same time, the safe haven assets are breaking records, the moves in precious metals, high-quality bonds, zero-coupon bonds, short-term sovereign debt, has intensified on a broader scale.

On 28 February 2020, the Australian 10-year bond yield touched the low level of 0.77%. The companies on ASX have reported disruptions due to the coronavirus outbreak. However, a large part of the companies are presently monitoring the situation, indicating that the damage might have been immaterial.

Nonetheless, the material numbers are likely to be reported to the exchange, thus additional panic could be expected. Uncertainty around the coronavirus, which has hammered production and economic activity in the second-largest economy of the world, is taking a toll on investor sentiments. Could this bear hammering turn out to be a great opportunity for the value investing community?

Given that there had been lockdown and wartime measure for a month in China, the numbers of these period are likely to come out soon, thereby adding fresh concerns to the markets.

It would be favourable to see China returning to work, as companies across the world have a largely connected supply chains with the country. And, the global companies have been detrimental consequence in markets as they are finding difficult to source supply.

At this juncture, we would need some promising developments like decrease in number cases, increase in number recoveries, fiscal support to fight the growing pandemic, positive news from the health organisations and officials.

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