“The relatively new and unknown coronavirus may present investors with an investment opportunity,” says Dr Nirmala Lee, Associate Professor in Banking and Finance.
Date: 28 February 2020
COVID-19, more widely known as coronavirus, has now spread beyond China, and so has its economic impact; in today’s world, there are no borders for viruses or economic impacts.
Coronavirus looks set to hamper global growth. Drastic measures such as lockdowns and quarantines have led to serious disruptions and distress among businesses in industries as diverse as tourism, entertainment, food and transport.
Major global markets have registered increased volatility with volatility rising to its highest level in three years. The volatility index VIX, also known as “Wall Street’s fear gauge”, has registered its biggest jump since February 2018. Fears of a global coronavirus pandemic have been found to have exerted a negative impact on stock prices. The S&P benchmark index is cited as no longer being perceived as a shelter against the virus, having declined 7.5% in the past four days (Source: Bloomberg)
Interestingly, the relatively new and unknown coronavirus may present investors with an investment opportunity with some financial products being perceived as undervalued, while traders price in the potential for wider swings over the next few months.
Other offshoots of the virus could include developments such as a boost to the already rising trend of the labour force working away from the workplace. The US oil company Chevron. for example, has asked about three hundred traders at its Canary Wharf offices to stay at home after a sick employee was tested for coronavirus – even before the arrival of the test results.
Is coronavirus a fear or an actual risk for the global economy? As of now, it appears to be both, with fear driving actual risks to greater heights every day.