Economic implications of a SARS/Coronavirus outbreak

[qldfrog]

Given that we do not have any core manufacturing businesses, the government can do what it usually does... nothing.

Damned i might agree with @rederob..must have been infected
Only nuance is that it actually can do nothing about it.. even if it wanted

 

[Dona Ferentes]

Is " just another virus?"

Coronavirus

“We’re seeing that many of the cities around China, people are actually going back to work. We’re seeing some of the shops in Beijing are opening up. When you’re going on the freeway now, you’re actually seeing traffic jams versus, say, two, three weeks ago, where the roads were pretty empty...we started seeing activity pick up a little bit two weeks ago. And then also, this week, we’re also seeing continued pickup” Herman Yu, CFO, Baidu Inc [Chinese technology multinational]

“It feels to me that China is getting the coronavirus under control. You look at the numbers, they’re coming down day by day by day” Tim Cook, CEO, Apple Inc

“In terms of what we are seeing currently all our factories by tomorrow will be back up and running, 85 per cent last week were back up and running, and 80 per cent of fabric mills we understand are up and running” John King, CEO, Myer Holdings Ltd

“Chinese airline customers, it’s about 10% of our backlog today. Flights touching China is about 20% of our engine flying hours. How much of that should we take into account? I can’t tell you, but what I can tell you is that year-to-date, flights touching China are down by approximately between 15%ish in January and 50% in February” Warren East, CEO, Rolls Royce Holdings plc

 

[rederob]

Damned i might agree with @rederob..must have been infected
Only nuance is that it actually can do nothing about it.. even if it wanted

Actually the Treasurer can use powers under the Foreign Acquisitions and Takeovers Act if an action is not in the national interest, as it did when it blocked Hong Kong-based CK Group's bid to assume ownership of the APA Group back in 2018.

 

[wayneL]

 

[Sdajii]

China new cases are down 97% in a month:

4th Feb - 3887
5th March - 160

Korea trending down too from a week ago:

29th Feb - 813
5th March - 467

These figures, especially from China, can't possibly be taken seriously.

 

[MrChow]

Seems inevitable we'll get to -20% just on sentiment (already at -13% so not a big call)

U.S and Europe new cases will ramp up over the next couple months to make plenty of headlines and earnings / GDP downgrades won't be pretty either.

The gray area for me is whether there will be a domino effect after the virus peaks - is that it or is there a lingering surprise in store for financial markets similar to what sub prime did.

 

[qldfrog]

Actually the Treasurer can use powers under the Foreign Acquisitions and Takeovers Act if an action is not in the national interest, as it did when it blocked Hong Kong-based CK Group's bid to assume ownership of the APA Group back in 2018.

I meant we have nothing left to rebuild from

 

[Dona Ferentes]

Caveat: it is Motley fool

The analysts at Macquarie Group Ltd (ASX: MQG) have put on their thinking caps and have come up with two sectors that they think will lead the recovery.

They based their findings on the SARS outbreak. Even though COVID-19 is worse than SARS, Macquarie thinks it will go by a similar playbook.

“Based on China’s experience, we suspect the growth in US cases peaks within weeks,” said the broker.

“This is not long, but the market’s horizon shortens in a correction. ASX stock returns should rebound with the US, unless Covid-19 cases rise more rapidly here.”

Climbing the wall of worry
There are a few other key worries that investors shouldn’t read too much into. Falling bond yields is one even though the 10-year yields on US and Australian government bonds have tumbled to record lows.

During the SARS, the Australian 10-year yield bottomed 95 days after stocks hit a trough, explained Macquarie.

Investors shouldn’t also be too concerned about the World Health Organisation’s (WHO) declaration of pandemic gloom. The broker pointed out that stocks bottomed within days of the WHO declaring SARS a crisis. Using the WHO as a cue would have left investors worse off.

“By the time the WHO said the SARS crisis was over, ASX stocks were up 12% and global stocks 20%,” added Macquarie.

Sectors to lead the rebound
The two sectors that led the SARS rebound were technology and resources.

“Software stocks rose 80% in the year after the SARS low,” said the broker.

“Given the secular growth story of ‘software eating the economy’ plus the benefit of a lower discount rate increasing the value of future earnings, we think investors will be drawn back to Tech.”

As for resources, these stocks outperformed industrials by 17 percentage points in the year after the SARS low. China stocks are already up 10% in the past month, which indicates that the worst of COVID-19 may be over.

Stocks for your corona watchlist
“As China has passed the worst, and its economy is coming back online, we think China is in a better position to stimulate,” said the broker.

“This should support resource stocks, which are still roughly half the valuation of Industrials.”

What’s interesting is that Macquarie found that it was price-earnings (P/E) re-rating and not earnings growth that drove the rebound.

 

[qldfrog]

Caveat: it is Motley fool

my view is that these analysts are dinosaurs repeating past history as an indication of the future: Chinese stimulus should boost the retails and citizens, not more roads and empty buildings already there a plenty, ..So I expect a consumption stimulus.so no mining boom out of it yet.my view only

 

[CBerg]

A little ray of sunshine?
https://www.scmp.com/week-asia/heal...navirus-south-koreas-aggressive-testing-gives

Coronavirus: South Korea’s aggressive testing gives clues to true fatality rate

• With 140,000 people tested, the country’s mortality rate is just over 0.6 per cent compared to the 3.4 per cent global average reported by the WHO

 

[MrChow]

Flu death natural variation in the U.S:

2012: -67% (-25,000)
2013: +258% (+31,000)
2014: -11% (-5,000)
2015: +34% (+13,000)
2016: -54% (-28,000)
2017: +56% (+13,000)
2018: +60% (+25,000)

 

[qldfrog]

A little ray of sunshine?
https://www.scmp.com/week-asia/heal...navirus-south-koreas-aggressive-testing-gives

Coronavirus: South Korea’s aggressive testing gives clues to true fatality rate

• With 140,000 people tested, the country’s mortality rate is just over 0.6 per cent compared to the 3.4 per cent global average reported by the WHO

Good point: so 0.6pc mortality rate with top medical facilities in first world, with no health system collapse; we now have the best case scenario

 

[qldfrog]

Good point: so 0.6pc mortality rate with top medical facilities in first world, with no health system collapse; we now have the best case scenario

Going with that figure, with 30% people contaminated..a low figure, that is nearly 47000 death
So the issue is where do you find the icu beds for these persons..and the ones who do not die
Even at a week in icu, that is 1000 beds per week just for the ones who die
Just a flu they said.and BTW, flu season is coming, what are your chances if you get both...buy the dip they say
Anyway while happy with the 0.6 fatality rate, it is a catastrophic impact well above our response ability here.
I will go and buy some TP on the black market.seriously, these figures ensure i will not reenter the market soon and if it is seasonal, australia might expect a double whammy just as the world markets start to raise again in northern spring

 

[qldfrog]

Flu death natural variation in the U.S:

2012: -67% (-25,000)
2013: +258% (+31,000)
2014: -11% (-5,000)
2015: +34% (+13,000)
2016: -54% (-28,000)
2017: +56% (+13,000)
2018: +60% (+25,000)

Based on these graphs the flu mortality rate is 6 times lower than the covid optimistic 0.6pc death rate, with the flu contamination lower due to vaccine.....and known treatments for the flu
Are we supposed to feel better?
But interesting figures nevertheless.

 

[rederob]

The federal government has a chance to kill one bird with stones: stimulate the economy at a broad level by increasing both the Newstart allowance and age pensions. Both these groups spend every cent on living costs so their is minimal wastage. Moreover, they are geographically well spread, so the stimulus will not be confined to capital cities. Such a stimulus would also be immediate and enduring.
That seems unlikely to happen, however, as the Coalition has scant regard for people who don't vote them into power. They instead think that funding massive one-off tax write-offs to business is more beneficial.
Maybe they are also loathe to repeat the tried and proven Rudd measure that showed the effectiveness of giving millions of individual taxpayers a relatively small amount to spend over a measured period of time.

 

[wayneL]

I think there is a certain moral hazard in giving one off payments, but go along with the increase in age pension and newstart. in my opinion that would give a more organic and holistic boost to the economy.

 

[moXJO]

One off payments won't work this time imo.
People can smell a recession, added with panic of COVID 19. Bills and mortgages will just get payed down.

I like the idea of raising newstart. The poorest in society will keep spending and need a boost.

 

[wayneL]

One off payments won't work this time imo.
People can smell a recession, added with panic of COVID 19. Bills and mortgages will just get payed down.

I like the idea of raising newstart. The poorest in society will keep spending and need a boost.

And...

 

[moXJO]

And...

I agree completely. It was overkill at the time. We were not in that bad of a position to throw money away like idiots.

 

[MrChow]

Seems like quite an angry guy on Twitter.

Makes Trump look like a stable genius.