Research & Investment Strategy

Coronavirus – tracking the path, anticipating the impact

Central banks and markets await the evolution of the outbreak

 

Key points

  • A new coronavirus emanating from Wuhan, China has infected over 40,000 people, mainly in China, and killed more than 900. It is still too early to judge how widespread an outbreak this will ultimately prove.
  • The impact is likely to exceed that of SARS in 2003. This reflects the greater size of China’s services sector and the country’s deeper integration in the global economy. Were SARS to be repeated now it would likely reduce global GDP growth by 0.25ppt, compared with 0.1ppt in 2003.
  • A prolonged outbreak in China over a couple of quarters would prompt a bigger global impact, estimated at around 0.5ppt. Global trade would increasingly be disrupted, undermining hopes for a post-trade-deal recovery, particularly in Europe.
  • A prolonged outbreak would also likely result in policy easing (monetary and fiscal) in China, and in close neighbours, including Singapore, Korea and Indonesia.
  • A sustained spread beyond China would significantly increase the global impact. An illustrative scenario with production shutdowns, travel restrictions and lost working days could deliver a global impact of 4-5ppt. This would result in global recession and would require policy responses in all jurisdictions.

This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.

This document has been edited by AXA INVESTMENT MANAGERS SA, a company incorporated under the laws of France, having its registered office located at Tour Majunga, 6 place de la Pyramide, 92800 Puteaux, registered with the Nanterre Trade and Companies Register under number 393 051 826. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

In the UK, this document is intended exclusively for professional investors, as defined in Annex II to the Markets in Financial Instruments Directive 2014/65/EU (“MiFID”). Circulation must be restricted accordingly. 

© AXA Investment Managers 2019. All rights reserved