China Coronavirus Impact on Stock Markets

Published / Last Updated on 29/01/2020

Chinese stock markets are currently closed for the Chinese New Year and reopen now on 3rd February 2020 (originally it was supposed to reopen on 31st January).  Stock markets indeed may not reopen until 10 February 2020 if the coronavirus spreads.

Hong Kong markets reopened today and fell by 2.8%.  We expect China markets to fall if things get worse.

To try and second guess future markets we have looked at the past and in particular the Severe Acute Respiratory Syndrome (SARS) crisis in China of November 2002 to June 2003.

In November and December 2002 Chinese markets fell by over 10% and then recovered the same in January 2003 only for the markets to stabilise for a few months and then fall by over 3% per month in a 5 month period over the summer to then recover by 20% in the final 3 months of 2003.

You may use this as a guide to the future of China and Hong Kong markets for 2020 but China has a different and a much stronger global position economically now and although the impact may not be as great but equally if the virus spreads it may do so and may impact on those US, UK and European listed global firms that rely on production in China, so it may drag global markets back if not contained.

One thing that can be said though, when Chinese markets have fallen they do then recover quite quickly so you may wish to de-risk and move out of Far Eastern markets for now or indeed choose to sit tight for the medium and longer term, remain invested and wait for any recovery if there is a significant fall.

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