After initial round of denial and complacency, the global
markets seems to be waking up to the grave threat that the spread of
coronavirus poses to the global economy and therefore global markets.
As more foreigners emerge out of China mainland, the information
opaqueness is diminishing insofar as the official Chinese claims and the
popular perception of the spread of virus is concerned. It appears that the
impact of virus far more serious initially estimated by global community or
communicated by Chinese officials.
In past two weeks the reports have suggested that the
coronavirus has invaded many more territories across Asia and Europe. Japan and
South East Asia Countries appear to be worst impacted. Japan and South Korea
have raised the threat alert level to the highest that allows the government to
lock down cities and businesses. Italy has also reportedly shut down schools
and crowded market places and stadiums till further notice.
WHO has feared that the virus could be a potential endemic that
may impact millions of people. Even the Chinese premier Xi issued a stern
warning to a gethering of over 170,000 government and ruling party officials --
the biggest of its kind saying, that the outbreak danger near the heart of the
government.
As per a latest research report published by Bank of America,
suggests that the US economy may be very close to the tipping point for
slipping into a recession. As per the analysis at the popular ZeroHedge blog,
"After more than a month of shocking complacency (because what, central
banks will somehow print antibodies and "fix" the covid pandemic
which will restore collapsing global supply chains?) traders are "suddenly"
realizing that the coronavirus outbreak contains a significant likelihood of
impact to the global economy and the potential to become a black bat,
pardon, black swan type event. An event which could quickly spiral into a US -
and global - recession."
IMF has also cautioned the global community that
"coronavirus epidemic could put an already fragile global economy recovery
at risk. In a statement made at G-20 meet, IMF chief Kristalina Georgieva said
"Global growth was poised for a modest rebound to 3.3 percent this year,
up from 2.9 percent last year. However, the COVID-19 virus -- a global health
emergency -- has disrupted economic activity in China and could put the
recovery at risk.
The global markets are obviously nervous. The investors are
rushing to take shelter in the safe haven precious metals, USD and bonds. The
risk assets - equities, emerging markets, and commodities are selling hard.
Indian markets have witnessed sharp correction accompanied with
rise in implied volatility. With the result season over, budget digested and
medium term credit policy in place, the market lacks much motivation to resist
the selling pressure emanating from global nervousness. Moreover, we are
entering the season when traditionally liquidity tightens due to year end
settlement demand, harvesting and advance tax payments. Traditionally, in many
parts of India, the fortnight before the festival of Holi is considered
inauspicious for buying new things, marriages and other functions.
Under the circumstances, it would be reasonable to assume that
the weakness in the markets may persist for little longer than most would have
assumed.
The question many readers are asking, whether this fall is an
opportunity to avail, an occasion to sit tight and wait for the tide to pass over,
or a trigger to sell and run away.
Though it is too early, but still I would like to review my
investment strategy in order to find answers to these queries.....to continue
tomorrow
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