February 2020 Market Update

As we conclude fifteen days of Lunar New Year celebrations on February 8^th, the mood for Chinese people worldwide is looking less sanguine as the impact of the Wuhan novel coronavirus progresses and continues to escalate to various parts of the world.

To that extent, investors are also weighing–in on the implications on financial markets with bargain hunters picking up stocks as Asia's stock market rebounded¹ and as opportunistic investors bet on the rising demand of healthcare and medical stocks.²

Coronavirus & China

As of February 7^th, there are already more than 31,000 confirmed cases and more than 600 deaths from the 2019–nCoV outbreak with the bulk of it concentrated in Mainland China, the world's second largest economy.³

Economic activity in many cities across China have been halted as factory closures are extended – a move that will hit global supply chains. The services sector has also been hit as people are encouraged to stay at home, with movie launches cancelled amidst the country's peak season for consumer spending.⁴

Analysts and economists are also downgrading China's GDP growth forecasts while the Chinese central bank steps up monetary and credit support to enterprises as the disease threatens to further dent a slowing economy.⁵

However, it is worthy to note that the fundamentals of China remain intact and there is likely to be some pent–up demand once the virus situation is over, and the expectation is that China will recover sooner rather than later.⁶

Trade Tensions

Since the inking of the initial Phase 1 trade deal on January 15^th, it has since been overshadowed by the coronavirus outbreak towards the month of February. However, Trump and Xi reaffirmed their commitment to implementing the trade deal amidst the coronavirus crisis⁷ with China slashing tariff on $75 billion of U.S. imports beginning on February 14^th.⁸

Trump & US market

The Dow Jones Industrial Average (DJIA) hit a record high on February 5^th as US stocks ignored dire coronavirus forecasts from companies and economists,⁹ but focused on the acquittal of President Donald Trump's impeachment trial on abuse of power and obstruction of Congress.¹⁰

Meanwhile, Tesla Inc's meteoric surge in share price of 36% in just two sessions on February 4^th and 5^th to a record price of around $887 has investors comparing the spike to bitcoin's surge back in 2017. The Silicon Valley darling run by Elon Musk has jumped 180% in the past three months and from its June 3^rd closing low at $178.97, the company's shares have gained more than 395%.¹¹

Central bank policy

The People's Bank of China plans to inject $22 billion worth of liquidity into the Chinese market to ease a global sell–off sparked by the spread of coronavirus.¹²

While the Federal Reserve has not yet made any indications of further policy measures, economists and market watchers says that the virus outbreak could force the Fed to step in and cut interest rates in 2020, if there are clear signs of a slowdown.¹²

After reading these market updates, we hope that you can continue to keep calm and refrain from making drastic changes to your portfolio. The last thing you want to do right now is to behave like other fellow Singaporeans who are clearing supermarket shelves and hoarding supplies. Just like how there are ample supplies for everyone if everyone behaves responsibly, the markets will take time to normalize in the long run.

Stay calm and invested with dollarDEX and start your no-fees investing journey now!

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