Previous outbreaks rebounded after initial market hit,27 Jan 2020 15:37
Previous outbreaks rebounded after initial market hit, JPMorgan says
Many investors are casting their eyes back to previous outbreaks in search of patterns and trends that might inform their investment decisions, even as many questions remain about the coronavirus outbreak, reports Anna Gross in London.
“It’s important that we don’t panic but really look to history as a guide,” said Kristina Hooper, chief global markets strategist at Invesco. “At the moment, so little is known that it’s difficult to even pull in experts.”
JP Morgan has assessed the market impacts of previous outbreaks, such as Sars in 2003, swine flu in 2009, Ebola in 2013 and Zika virus in 2015.
The Sars outbreak sparked an 8.6 per cent drop in the MSCI China index between March and April 2003. The index rebounded 31 per cent over the following three months. Similarly, swine flu triggered a 4 per cent decline in the MSCI Mexico, rebounding 25.7 per cent over the three-month period that ensued.
Sars is widely considered to be the most comparable historic viral outbreak. Hong Kong equities shed almost a fifth of their market capitalisation over the course of a few months during the epidemic and Chinese markets were down 15 per cent, according to analysis by JPMorgan. However the analysts note that, as uncertainty eased in late April, MSCI China and Hong Kong reversed all of their losses and went on to make significant gains.
In a sense, the more equities fell initially, the more they subsequently rebounded. These episodes did not lead to a prolonged period of selling, and were a buying opportunity within weeks.
Luxury, hotels, restaurants, leisure and airlines were the sectors that were hit the most, outperforming the market when it rebounded.
"Investors with a short-time horizon should expect that if they don’t move to safe haven asset classes they will be negatively impacted,” said Ms Hooper.
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