Comment: Why you should buy into the Chinese coronavirus market crash
The 8% sell-off in Asian markets today may be scary for investors, but the message still has to be: don’t panic.
Given that shares in China have been suspended for New Year holidays during the past dramatic and frightening week, they were always bound to tumble.
And, as with most price moves of that order, they will doubtless rebound. Sure, spending in China will take a short-term hit. GDP in the country will temporarily fall.
But it will return with a vengeance once the virus ebbs. Even if some of the domestic spending that would have happened over the holiday period is permanently lost, customers of Chinese factories around the world still need their goods.
Bears point out that Wuhan — the epicentre of the outbreak — is a major transport hub for those industrial plants. They warn of severe disruption and bottlenecks in getting supply lines open again. They may be right. But the very reason the virus has spread quickly compared with previous outbreaks — China’s rapidly improved transport infrastructure — should mean the disruption won’t last for long.
While the virus is spreading rapidly, according to the World Health Organization, the rate of new cases is slowing every week and the death rate of those who have contracted the virus remains low, at 2%.
In short, Chinese companies are not worth 8% less today than they were a week ago.
Frightening though this outbreak is, my bet is that in time, we’ll look back on today’s prices as a decent buying opportunity for China-focused stocks and funds.
