The Spread Of The Epidemic Has Hit The Market And The Global Stock Market Is Facing "Selling Tide".

Now, with the initial success of the epidemic control in China, many countries such as Korea, Japan, Italy, Iran and other countries are beginning to break out, and the subsequent development momentum is hard to predict. This upset the original judgment of the market and aggravated people's worries about the global economic outlook. China's economy is closely linked to the world economy. China's industries are highly related to industries such as Japan and South Korea. The global supply chain is interlinked, and which links are not conducive to economic recovery.

With the spread of the new crown pneumonia epidemic across the globe, investors' confidence that the epidemic will be under control is now shaken.

On the first trading day of the week, the global stock market suffered a "selling tide". Following the collapse of the Korean stock market, the European stock markets also fell under the guidance of Italy. The panic spread to Wall Street and the Dow Jones Industrial Average plunged 1000 points. Panic index surged 46.55%, investors rushed into the US debt and gold hedging.

The market is worried that if the epidemic is widespread in the world, the economy will be hit harder than expected. Today, the epidemic is unpredictable and the market will continue to adjust in the short term. On Tuesday, the three major indexes of A share were mixed, while the Korean stock index rebounded more than 1%, but European stocks still fell.

Beijing time 10:30 on the evening of 25, 25, the U.S. stock market rebounded, the Dow opened up 0.6%, the S & P 500 rose 0.6%, the index rose 0.9%.

Xia Chun, chief research officer of Noah wealth, said in an interview with the twenty-first Century economic report, investors should have a long-term vision in the market turmoil, maintain the balance of debt and maintain balance between liquidity and illiquid assets. Insisting on holding high-quality assets and reducing time to time transactions are the best coping strategies.

In February 25th, a passer-by walked through an electronic index information screen on the street in Tokyo, Japan. - Xinhua News Agency

Multinational outbreaks hit the stock market

With the increasing number of confirmed cases in South Korea, Italy and Iran and the rapid warming of market panic, the black market on Monday has been ushered in the sell-off of global stock market.

In Asia, the rise in confirmed cases in South Korea triggered panic in the market. The KOSPI index closed down 3.8% in South Korea on Monday. In Europe, Italy became the most serious country in the epidemic situation. The FTSE Italy MIB index plunged 5.43%, Germany, France, Austria and the United Kingdom were not spared the stock market, and the total fell more than 3%.

The panic spread to Wall Street. On Monday, the three major indexes of the US stock market dived, and the Dow Jones Industrial Average fell more than 1000 points, down 3.56%, the NASDAQ index fell 3.71%, and the S & P 500 index fell 3.35%.

At the same time, investors have flocked to the US debt market to avoid the risk, pushing the yield of 10 - year treasury bonds down 11 basis points to 1.36%, close to a historical low. April delivery of COMEX gold futures rose 1.7%, to 1676.60 U.S. dollars / ounce, close to the 1700 mark.

What makes financial markets turbulent is the number of new crowns of pneumonia rising worldwide, and the trend is increasing. According to the bulletin of the Ministry of disease management of South Korea, 25 new cases of newly diagnosed crown pneumonia were newly diagnosed in 84 cases from 9 hours to 16 hours local time. 977 cases were diagnosed and 10 people died.

Italy has implemented quarantine measures in 11 towns, and the lives of some 50 thousand people have been affected. Up to 24 pm local time 9, Italy confirmed the new coronavirus infection increased to 229 people, 7 of them died. The joint expert group, led by who, has arrived to assist in the prevention and control of the epidemic.

Jia Han Pu, director of the public relations and information center of the Ministry of health of Iran, said at noon on 25 noon, 95 cases of new crown pneumonia were diagnosed in Iran, and 15 cases died. There are cases in various Middle East countries such as Afghanistan, Bahrain, Kuwait, Iraq and Oman, all of which have a history of Iran residence.

WHO (WHO) director general Tan Desai said at a press conference in Geneva 24, although the number of new cases has slowed down in China, the surge in new cases outside China is very worrying. World health experts are worried that the outbreak in Iran is more serious than the official report, calling for emergency assistance from the international community. Another expert group arrived in Iran on the 25 day to help fight the epidemic.

Epidemic impact or super market expectations

Over the past week, Wall Street has been debating whether the market underestimated the impact of the epidemic on the global economy. Analysts have lowered their earnings forecasts. Data from Refinitiv, a financial data company, showed that in the first quarter, earnings expectations for US stocks fell by nearly half to 3.2% from the 6% growth forecast at the beginning of the year.

In fact, at the beginning of the outbreak, the market focuses more on China's economy. Most international agencies such as IMF and Wall Street investment bank agree that from the 2003 SARS experience, the impact of the epidemic on China and the global economy is short term. Once the epidemic is controlled, a strong rebound will be achieved.

But now, with the initial success of the epidemic control in China, many countries such as Korea, Japan, Italy, Iran and other countries are beginning to break out, and the subsequent development momentum is hard to predict. This upset the original judgment of the market and aggravated people's worries about the global economic outlook. China's economy is closely linked to the world economy. China's industries are highly related to industries such as Japan and South Korea. The global supply chain is interlinked, and which links are not conducive to economic recovery.

In order to protect the economic situation, it is necessary for all countries to join hands to resist risks. At the meeting of finance ministers and central bank governors of the group of twenty (G20) held in from February 22nd to 23rd, officials of the meeting called for moderate and easy monetary policy and positive fiscal policy this year to alleviate the impact of the epidemic on the global economy.

Georgi Ieva, President of the International Monetary Fund (IMF), said during the meeting that the forecast of global economic growth in 2020 will be 0.1 percentage points to 3.2% based on the prediction in the IMF baseline scenario. She pointed out that although the impact of the epidemic continues to emerge, the WHO assessment is that through the adoption of effective coordination measures, the spread of new crown pneumonia in China and the world can be curbed.

Moodie, the international rating giant, pointed out in his 2020-2021 year global outlook report that the outbreak of the new crown pneumonia weakened the market's confidence in the global economy becoming more stable. Although it was too early to make an assessment, Moodie reduced the growth rate of the G20 economy to 2.4% throughout the year, including the growth rate of GDP in many countries including China, Korea and Japan.

Moodie's benchmark assumption is that the epidemic will be controlled at the end of the first quarter, and economic activity will recover in the two quarter. Moodie believes that China's economy has been the most affected at present, but the rest of the world's economy is also affected by the global tourism industry being disrupted and the supply chain short interruption. If the epidemic is not controlled as expected, the impact on the global economy is likely to intensify.

The more conservative Oxford Institute of economic research predicts that the global GDP growth rate is expected to slow to 1.9% in the first quarter of this year, and the annual growth rate is expected to slow down to 2.3%. What if there is a pandemic? The agency simulated two scenarios through the model: if the epidemic is prevalent in Asia, the world economic growth in 2020 will be reduced by 0.5% compared to the baseline scenario; if the epidemic is global, the world economic growth will be reduced by 1.3% compared to the benchmark.

Stock market investment strategy in turbulent times

Xia Chun told the economic news reporters twenty-first Century that the world's major economies began to recover from October last year. The US and Europe have launched a new round of quantitative easing. The Sino US trade negotiations have reached the first stage agreement, so the global capital market has been doing well in the past three months.

Since the outbreak of the stock market, the stock market has experienced a sharp decline after a short period of time. The underlying reason is that the global economic activity cycle is on the rise and the policy cycle is easing. Xia Chun analysis pointed out that the previous market has a more optimistic estimate of the baseline situation of the economic impact caused by the epidemic.

As for the trend after turbulence, Xia Chun believes that short-term fluctuations are unpredictable. The essence of value investing is to buy a country's development or enterprise's long-term value, which has nothing to do with price changes in the short term. This reason does not want to understand and go to casino gambling is no difference.

Xia Chun believes that in the time of market turmoil, it is the best coping strategy to maintain the balance of equity debt, balance liquidity and illiquid assets, and insist on holding high-quality assets and reducing time to time transactions.

In a recent research report, Morgan Stanley stock strategist Michael Wilson pointed out that despite the sharp adjustment in the fourth quarter of 2018, the overall performance of the S & P 500 index has been very good in the past two years, with an overall return of 30.3%.

Michael Wilson also points out that market performance is divided, with cyclical and small cap stocks the worst. He believes that although the poor performance of these two types of stocks is partly due to slowing income growth, the real driving factor is the downward trend in interest rates, and the growth level at the macro level is not ideal. Therefore, the bank is now more inclined to recommend defensive stocks.

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