What else?
Your guess is as good as mine, to be honest. This is a fastmoving situation. But here are a few of the questions that I’ll certainly be asking in the coming months:
What will be the effects on transport and tourism? Not just in China, but in the world at large? Recent TV coverage of luxury ocean liners being quarantined at sea will have done nothing to boost the fortunes of the sector, and there will presumably be a fall in passenger air traffic.
That anxiety will pass in time, but it won’t start to happen until consumer confidence has been bolstered by solid news about the virus – its transmission, its seriousness, and the state of medical preparedness. Let’s not forget, either, that China sends over 150 million tourists out to the rest of the world every year, with a spend of nearly $300 billion. (That’s twice as much as US travellers abroad, by the way.) They’ll be missed if they don’t come.
Where will wider commodity markets such as oil and gas go if the China lockdown continues and the factories aren’t working? Well, we’ve asked that question already, and it isn’t looking promising at present. But oil and gas markets have a habit of getting it completely wrong. Remember how the International Energy Agency projected a $142 per barrel oil price in mid-2008, just before it fell to $50? Then, it was expected supply difficulties that didn’t happen. This time, with Iran and the Straits of Hormuz on a war alert, China’s travails may not be such a price driver as some people think. Especially for beleaguered Japan, which has virtually no fossil fuels at all.
Automobiles look set to take a jolt from the Chinese situation, if only because China has been the world’s biggest car maker since 2009. But look closer. Any time your Volkswagen or your Peugeot needs a new alternator, the chances are that the official spare part was built in the People’s Republic. I’ll be looking for signs that the
Japanese and European manufacturers have got their backs covered.
And don’t even get me started on Apple, which is already said to be running low on inventory…
How will hospitals and health services cope with the added burden of dealing with coronavirus cases? Will they bust the various governments’ creaking budgets, and will that drive an expansion of government borrowing? What will it do to central bank activity?
Conversely, will there be radical new opportunities for investors in biotechnology, pharmaceuticals and medical support services?
Answer: We have little idea. As of mid-February, many fund managers are making sanguine noises about a secondquarter recovery, both in China and elsewhere. I’d say I’d like to believe them. But I’m going to be looking a little more closely for hard evidence. I wouldn’t be happy lining my nest with feathers that looked like they came from an ugly duckling but turned out to be a black swan.
