Global Market Shock, Multinational Stock Market Falling To Callback Area

With the emergence of new crown pneumonia cases in six continents around the world, market investors have expressed concern about the continued spread of the epidemic throughout the world, and panic has swept the financial markets.

In the US, the three major indexes of the US stock market once again plunged by more than 4% in February 27th, falling into the callback area from the historical high point in only six trading days (at least 10% from the recent high point withdrawal level). On the 28 th, US stocks continued to dive, the Dow Jones index fell 3.06%, the NASDAQ index fell 3.3%, and the S & P 500 index fell 3.15%.

In February 28th, the Asia Pacific region's major stock indexes fell sharply by US stocks, the Nikkei 225 index fell 3.67%, the South Korean KOSPI index fell 3.3%, the FTSE Singapore Straits Times Index fell 3.23%, the Australian index fell 3.35%, China's A share index fell 3.71%, and Hong Kong stock index fell 2.42%.

In Europe, the main stock index plunged across the board in February 28th, the German DAX index fell 3.4%, the FTSE 100 index fell 3.1%, the French CAC40 index fell 3.9%, and the FTSE Italy MIB index fell 3.2%.

Hong Hao, managing director and head of research at the Bank of Hong Kong, believes that the market still underestimates the impact of the new crown virus epidemic on the global economy. Most of the analysis focused on the impact of economic growth, the negative impact estimated at about 0.5-1%, "obviously, it is impossible."

Hong Hao pointed out that the market must pay attention to changes in the liquidity structure at the company level, including the recent zero total suspension of credit market debt in the US credit market. About two hundred companies in the S & P 500 issued early warning or risk statements related to the epidemic, and the global supply chain was hit.

Hong Hao's advice to investors is to be cautious: if you hold good stocks on your hands, hold them. If you have cash in your hand, please wait.

The new crown spread to six continents around the world.

Despite the continued decline in new confirmed cases in China, the first case of new crown pneumonia has been reported in Africa, Oceania and Europe recently, indicating that the epidemic has spread to a wider global scale. Investors' concerns about the global recession have intensified, triggering a massive sell-off.

According to the bulletin of the national health and Health Commission of China, 327 new confirmed cases were reported in February 27th, a new low since January 23rd, and 3622 cases of newly cured cases were released on that day. A total of 78824 confirmed cases were reported and 2788 died.

However, for the first time in China, there were confirmed cases in many countries outside China. Among them, sub Saharan Africa, Nigeria, also Africa's largest population, has the first confirmed case of new crown pneumonia, which comes from Italy, the most serious country in Europe. In Oceania, a passenger returning from Iran to New Zealand became the first case of new crown pneumonia in the country. In Eastern Europe, Belarus and Lithuania also had their first cases.

According to the monitoring data of Johns Hopkins University, as of the evening of February 28th, the total number of confirmed cases reached 83704 cases and 2859 cases died in Beijing. Outside China, South Korea has the most serious diagnosis of 2337 cases, the most severe in Europe, 655 in Italy, 270 in the Middle East, and 226 in Iran, except for the diamond princess. More than 55 countries or regions have infected cases outside China, accounting for about 3/4 of new cases outside China.

The director general of the World Health Organization, Geneva, said in February 27th that outside China is the biggest concern, and that the global epidemic is at a critical moment. It is recommended that all countries take prompt action.

Tan Desai pointed out that the new crown pneumonia virus has no borders or races, and has nothing to do with the GDP or development level of a country. It calls on every country to prepare for early detection of cases, isolation of patients, tracking of contact groups, and quality of clinical care to prevent outbreaks of hospital outbreaks and community communication.

To prevent the spread of the epidemic, Japan, South Korea and Italy are increasing isolation control measures, which will inevitably bring different degrees of interference to personnel flow, economic activities and even the global supply chain.

As the economies of these countries are already relatively weak, the spread of the epidemic has exacerbated fears that the economy may be heading for recession. Under the leadership of the Korean and Italy stock markets, the Asia Pacific and European stock markets have started a slump. The "high and cold" stocks can not be left alone. With the emergence of a case of infection that could not be identified in California, panic swept through Wall Street. Global stock markets will experience the worst week since the 2008 financial crisis.

In fact, Hong Hao analysis pointed out that before the plunge, the market was extremely dense, and the mood of extreme excitement had already been predicted in advance. Now that many heavily loaded stocks have fallen by more than 10%, many large funds will be forced to reduce their holdings so as to reduce portfolio risks and deal with the pressure of redemption. This process has led to extreme negative effects on market price movements and continuous negative correlation of returns. Overselling has led to larger oversold.

At present, the market outlook is still very uncertain, but market sentiment has begun to turn from extreme optimism to extreme pessimism. Hong Hao believes that in this case, the short term overseas market may be a short overdue technical rebound. But mood swings are fleeting. It will be dangerous to operate according to market sentiment. Now, the cost of hedging options against portfolio risk is very expensive.

Global economy faces recession risk in the first half year

According to a survey released by China Chamber of Commerce in February 27th, it is reflected in Chinese and American businesses that the outage of travel and the decline of staff productivity are the biggest challenges. Nearly 1/3 of respondents expect to resume normal operation before the end of March, and about 12% of respondents expect to recover at least in summer.

Although it is too early to judge the impact of the epidemic on industry growth this year, 48% of respondents expect a certain degree of decline. If the epidemic ends before April 30th, about half of the respondents predict that their income in China will decline. If the epidemic continues to August 30th, nearly 1/5 of the enterprises expect that the income will drop by half.

According to a survey conducted by the China EU Chamber of Commerce, most European businesses in China expect to see a decline in revenue in the first half of this year. Due to the overall and severe impact of the epidemic, 1/4 of enterprises expect revenue to be reduced by more than 20%. Nearly half of the respondents said they were planning to reduce their annual business targets by the epidemic. 56% of respondents said the epidemic caused a decline in demand for products and services.

However, China's epidemic prevention and control is still grim and complicated, but it has shown a trend of overall stability and stability. At present, China is doing a good job in the prevention and control of epidemic diseases, and is making an orderly return to work. It has promulgated a series of policies and measures to stabilize the economy, including stabilizing foreign investment and stabilizing foreign trade. In the low risk areas, social and economic operations are gradually recovering. Meanwhile, China's economy is resilience. Under a series of effective measures, the short-term impact will not change the long-term trend of China's economy.

Under the background of global spread of the epidemic, global production and manufacturing are disrupted, the consumer market is shrinking, and the global impact is expanding.

Moodie, an international rating agency, said in a report in February 27th that the probability of the epidemic spreading worldwide has risen from 20% to 40% as the number of confirmed cases outside China has soared. "Our previous hypothesis that the virus will be controlled within China has proved to be too optimistic."

If there is a global pandemic, Moodie believes the result may be the global and US economic downturn in the first half of this year. "Before the outbreak, the economy has been very vulnerable to any factor that is not in the script." Moodie analyzed that the outbreak of the new outbreak was completely divorced from the "script".

As for the United States, Moodie pointed out that the epidemic has brought downside risks to the economy. Despite the limitations of monetary policy, the Fed may need to intervene at the last minute. That is to say, Moodie believes that the Fed is unlikely to have an emergency interest rate cut now.

Wall Street investment bank Goldman Sachs also cut the US GDP growth forecast in the first quarter from 1.4% to just 1.2%. Jan Hatzius, chief economist of Goldman Sachs, pointed out in the report that before the epidemic was contained, the risk was clearly downward. More and more enterprises are forecasting that if supply chain disruption continues to the second quarter or even later, it will reduce production.

In addition, Goldman Sachs also lowered its forecast for the average profit this year in February 27th. Goldman Sachs lowered its earnings per share (EPS) forecast from $174 to $165 this year in the S & P 500 index, which means corporate earnings are flat and stagnant in the same period last year.

Ecognosis Advisory CEO Andrew Vries (Andrew Freris) analysis pointed out that the market is very worried about the impact of the epidemic on the economy, but also at a certain stage of erosion of corporate profits. "The only thing central banks can do is to lower interest rates, but lowering interest rates will not help restore the supply chain of individual countries."

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