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Covid-19 and Investing
When you thought the Covid-19 coronavirus outbreak is showing signs of slowing, South Korea reported spikes in infection rate to now at 763 confirmed cases with 7 deaths in matters of few days (10.45 am, 24 Feb 2020). Italy is catching up with Japan at 132 confirmed cases versus Japan’s 135 cases. Singapore had 89 confirmed cases.
Covid-19 is contagious and spread fast from human to human. Infection rate is worse than SARS (2003). Hospitals will find difficulty in coping with huge number of patients infected with the coronavirus. When a person comes into contact with a confirmed case, he/she is quarantined for 14 days (which is the incubation period of this virus). Countries are imposing travel restrictions and also advising own residents from travelling to affected countries.
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Wuhan city in the Hubei Province is the epicentre of this Coivd-19 outbreak. As a result, Hubei province is under lockdown with residents not allowed to travel out of this province. Production lines across China have not really fully started since the Chinese New Year break.
Weaknesses in the world’s second largest economy and factory of the world China have ripple effect round the globe. First quarter economic numbers will be affected significantly. Singapore is bracing for the worst.
Sectors such as the travel industry, hotels, food & beverage outlets, retail businesses and transport are the first to be hit. With lower tourist arrivals and local residents avoiding crowded places, these businesses are reporting lower sales.
If this condition were to drag on past first quarter, cash flow would become an issue for businesses. With low revenue but continuing cash outflows like wages, rents, loan repayments, some may not survive.
This kind of uncertainty makes investing difficult. When is the bottom is anyone’s guess. The stock markets have not fully factored in the severity of Covid-19. Our hope is that China can contain the coronavirus, and the rest of the world could do more to limit the spread of the virus within their borders. The world has to stop it before it becomes a global pandemic with the spread of Covid-19.
Stock Indices
Hang Seng (HK) 28,189.75 26,820.88 -4.9%
Shanghai Composite 3,050.12 3,031.23 -0.6%
STI (Singapore) 3,222.83 3,146.20 -2.4%
Nikkei 225 (Japan) 23,656.62 23,386.74 -1.1%
31-Dec-19 24-Feb-20 YTD Change
