The Wuhan coronavirus and its impact on the markets

US markets had its biggest drop since Oct as growing concerns over the corona virus hit investor sentiments. The disease has killed at least 82 people in China and infected more than 2,800 people around the world.

Investors are starting to be concerned over the economic impact of the outbreak, with Singapore's economy also expected to be affected as quoted by Minister for MIT, Mr Chan Chun Sing.

However, based on history, markets have been quick to bounce back from disease outbreaks- with the MSCI World Index posting gains in the 1-6 months after the breakout of an epidemic.

With many drawing similarities of the Coronavirus to SARS in 2002-2003, market strategists have been analysing the performances of market back then. Jefferies chief strategist observed that the "maximum panic appeared around the WHO Global Health alert while markets bottomed as the WHO began to lift travel bans."

The WHO on a 23 Jan briefing had said that the coronavirus is not yet a global emergency due to the "limited" cases of the virus and containment efforts China has put in place, but the spread of the virus "may yet become" an international emergency and WHO would convene the panel if necessary.

The WHO has only declared a public health emergency of international concern only five times: the 2009 H1N1 influenza pandemic, the 2014 polio outbreak, the 2014-2016 Western Africa Ebola crisis, the 2015-2016 Zika virus epidemic and the 2018-2019 Congo Ebola outbreak.

The designation of an "extraordinary event" was created after the 2002-2003 outbreak of the severe acute respiratory syndrome, or SARS, coronavirus, which WHO considers as a public health emergency, along with smallpox, wild type poliomyelitis and any new subtype of human influenza.

It is however worth noting that the recent correction is coming off extreme bullishness of the US markets which have been making new highs recently. With the more cautious attitude from the market, the CNN Fear & Greed index has also start to correct from its peak at the start of the year.

Whether this is a temporary correction or start of a bigger market decline, only time will tell. 

This article was first published by GEM COMM. All content is displayed for general information purposes only and does not constitute professional financial advice.