This too Shall Pass..

  • Returning from a long holiday, Chinese Markets Plunged over 7% as they opened Yesterday, fearing Corona Virus Mayhem and virtual Shutdown of its top Economically important Towns.
  • US Markets bounced backed yesterday with S&P / NASDAQ Closing at 0.73% & 1.34% Higher respectively.
  • India, today showed resilience, With SENSEX bouncing back over 917 Points and covering up losses of BUDGET Day.

Virus Outbreaks in the recent past, SARS, EBOLA, ARIAN Flu, was curbed before it could widespread like 1918 Spanish Flu which took away anywhere between 50-100 Million lives. But in all the cases apart from the loss of life, Economic Toll was also measurable. Though in all the above 3 cases recovery was swift.

Corona virus lockdown & Virtual Standstill of Chinese Major Chinese Cities could potentially shave off 1% of its 1st Quarter Economy & Potentially hurt Global Economy- Morgan Stanley.

Assuming Corona Virus Peaking in Feb/ March 2020 it can potentially slow down global Economy by 0.15%-0.30%. But as the underlying drivers of the global recovery remain intact, growth should get back onto the recovery path once the effects of disruption fade.

If the outbreak continues longer for the next 3-4 months then add another 0.05-0.10% Off from the Global Economy.

Apple, Starbucks, and Ikea have temporarily closed stores in China. Shopping malls are deserted, When the SARS outbreak happened in 2002 Chinese economy had a much smaller role in Global GDP, but Today it stands BIGG. Almost as big as US Economy.

In 2002-03, When SARS Broke out, India’s total trade with China stood at a paltry $4.8 billion which has now expanded more than 18 times to $87 billion in 2018-19. Though initially there will be Negligible damage to the Indian economy, prolonged uncertainty & failure to contain the epidemic can start damaging Tourism ( DGCA, yesterday imposed blanket ban on Chinese flyers), Slow down exports to China & Soften Inflation.

Warmly,
Yogendra Shah.

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