The global economy is at risk of screeching to a complete halt as the coronavirus also known as COVID-19, continues its march across all continents.
Last week the first new cases of the virus were diagnosed in the lone holdout country in North America yet to be affected until now, (Mexico) and sub-Saharan Africa (Nigeria).
Investors are clearly worried about what all these means for the global economy and supply chains that powers most of the growth in the world.
That sentiment can be clearly seen from the sell-off in risk assets from equities to oil and an ongoing flight to safety.
The U.S main stock gauge, the S&P 500 plunged more than 3 percent on Friday and is now down over 15 percent from its record high, Crude oil (Brent) slid toward $49 a barrel, while European stocks fell to lows last seen in August and Asian equities also sold off.
In the ensuing hunt for havens, investors bought currencies like the Japanese yen, and U.S Treasuries or bonds.
The World Health Organization (WHO), meanwhile raised its global risk level for the virus and major companies warned that the disruptions from the virus could scupper sales and profit forecasts.
Nigerian and African markets weren’t left out of the melee.
The NSE All-Share Index and Market Capitalization both fell by 4.28 percent to close the week at 26,216.46 points and N13.658 trillion respectively. Nigerian stocks are down 2.33 percent so far this year.
In South Africa (the continents second largest economy), the rand fell to near a four-year low, while stocks entered a correction and bonds slumped.
Amid the market hysteria, here are some facts about the virus that suggests things are not as bad as they seem.
The new coronavirus that originated in China, appears to get more dangerous with age, with older people 70 to 90 years appearing to be worst hit in terms of fatalities.
While this is cold comfort for older folks it still suggest that younger healthier people likely to be found in the labour force have a natural ability to fight off the virus if exposed to it.
Michael Mina, MD, PhD, an assistant professor of epidemiology at the Harvard T.H. Chan School of Public Health, told WebMD Health news that:
“There seems to be this threshold — below [age] 35 we’re seeing practically zero [cases]. As people increase in age from their 40s to 80s, we’re seeing mortality increase.”
The virus now counts more than 80,000 cases and 2,700 deaths, the majority of them in China.
That is equivalent to a mortality rate of about 3.37 percent, which is lower than the severe acute respiratory syndrome (SARS) a similar virus that started in China in 2002.
SARS also hit people over the age of 60 the hardest, and more than 8,000 people contracted the virus over 8 months, out of which nearly 10 percent died.
A study published in The Journal of American Medical Association that examined the first 45,000 cases in China found that 80 percent of the reported cases appear to be mild.
Of people aged 70 and above who got the virus, 8 percent died, the study found, along with nearly 15 percent of those aged 80 and older.
Smokers also seemed more vulnerable to the disease, as well as people with heart problems, diabetes, or lung issues.
Some doctors and researchers have compared COVID-19 to viral pneumonias, which tend to have a worse effect on people who already have a weakened immune system.
Pregnant women also do not seem to be impacted by the infection, though only a few have been tracked globally so far.
One study published recently found that nine women who became infected with COVID-19 did not pass the virus on to their babies.
So as the world races to find a vaccine for the virus (Israeli researchers recently announced that they were “weeks” away from developing a vaccine), it is important for everyone to note that this is not yet a global Pandemic and fatality rates are much lower than other major outbreaks in the past, even as people are expected to adhere to better hygiene like washing of hands often with soap.
Of course the rationale for the sell-off in global and domestic markets may well be justified, due to the potential disruptions to economic activity like consumption and travel and hit to global growth.
However market reactions are seemingly overblown.
The IMF expects China to have a sharp recovery once the virus abates and for it to have only a “mild impact on the rest of the world.”
Looking at historical selloffs similar to this scenario, the negative sentiment also looks overdone.
The SARS outbreak contributed to a slump in global markets in early 2003, but stocks recovered once the outbreak was contained. The S&P 500 dropped roughly 10 percent from the start of the year until mid-March, but finished up more than 26 percent for the whole year.
With bellwether stocks like Guaranty Trust Bank (GTB) and MTNN sitting at or near 52 week lows, it may be time for the smart money to begin to take a look.
