The more information you learn about the novel coronavirus and its worldwide effects, the more worried you may feel. You may wonder what it might do to your health, to the economy and to your investments.
For China, it looks like they are being hit the hardest. Of course, that’s where the disease originated, so they’ve had the most confirmed cases and deaths. They have the most people quarantined, which means businesses, factories and stores are closed.
China Manufactures and Consumes
China not only manufactures and ships many things to the US, they also consume a large amount of the same products. Since tens of millions of Chinese shoppers are quarantined, US businesses like Walmart and Starbucks have had to temporarily close stores there.
But it’s the Chinese Stock markets we’re watching. After being on a long holiday for the Lunar New Year (January 24 to 30), “Monday’s (Feb. 3) market sell-off in China was the worst in many years and wiped nearly half a trillion dollars off the value of the country’s biggest companies. Now the Chinese government has to find ways to stem the panic before the coronavirus epidemic makes things even worse.” From CNN Business
China’s Securities Finance Corporation (CSF) and Central Huijin, an arm of China’s sovereign wealth fund are known as China’s “national teams.” They are the investment managers sent in to buy up stocks to keep the markets steady. They are ready for a comeback since the coronavirus is causing losses in the markets.
Injecting Billions into the Financial System
The Chinese government has let the public know that state intervention is on the table. CNN said “The central bank on Monday (Feb 3) said it would inject billions of dollars into the financial system by buying short term bonds to help keep bank lending flowing.”
The CNN article also noted that when compared to the 2003 SARS epidemic, coronavirus has already caused more deaths. This has caused some economists to caution, “That the impact on China’s economy could be severe — a troubling prospect for an already fragile economy, and for global growth.”
According to Reuters, the People’s Bank of China has already added 1.2 trillion yuan ($173.81 billion) into money markets and cut the interest rate on those short-term funding facilities. There’s a chance of a lending rate cut, short selling is limited, and they have encouraged mutual fund managers not to sell shares.
According to Mayank Mishra of Standard Chartered Bank in Singapore, “It is a clear message that they want to take growth-supportive measures and keep the market reassured.”
Coronavirus Affects Your Investments
You can see that even if you’re not investing in the Forex markets, the coronavirus could have an effect on your investments. Yes, the Chinese government is infusing money into its markets, but that merely keeps things flowing.
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