The death toll of the Coronavirus has reached 1000 as of this week, and unfortunately this outbreak is still to be contained. Its impact on the Chinese market economy should not come as a surprise. Historically, most crises, be they geo-political or economic, have yielded some effect on local and/or global markets. The Coronavirus is a peculiar circumstance that has far a reaching impact outside of China.
The economic consequences of the virus have ironically showcased China’s dependency on worldwide markets, as fear from contamination continues to increase, leading to business related discrimination.
Three major Chinese cities are quarantined, as well as the entire Hubei province, affecting tens of millions of lives, culminating in a destabilized local economy. This inequality is a direct causality of the disrupted travels of millions of workers in and out of the affected regions, in effect interfering with the economic flow, as many are separated from their work-spaces, leading to service and product shortages.
In particular, Asian stocks have been negatively influenced and Chinese tourist companies; many travel plans are on hold until the situation is stable, with the biggest event of the year, namely the Chines New Year, currently not happening.
Investors have always reacted in similar ways when the time calls for it, and the Coronavirus epidemic is not an exception. Most have taken broad steps toward the so called safe-haven currencies and commodities, or any other assets/derivatives untouched by the reigning predicament.
The best example of one such assets is gold. The precious metal has seen an upthrust in interest since the outbreak. The middle of January in particular saw many investors putting their money where the yellow glaze is.
Another beneficiary is the Japanese yen, which historically has seen gains in times of market turmoils. The Coronavirus, it seems, continues this trend.