John Wyn-Evans, head of investment strategy at Investec Wealth and Investment, said the markets were not in a panic as the coronavirus fatality rate appeared lower than the Sars outbreak a few years ago – although the infection rate seemed higher. But he stressed that it was very serious and had potential to get bigger.
‘From an economic point of view, it’s still very much early days. The epicentre of this obviously being in China, the worst effects will be seen there. And then it will be a question of the ripples extending further from China out into the rest of the world.’
Forecasters were estimating a wide range of growth possibilities for China in the first quarter – including zero – said Mr Wyn-Evans, with the country in ‘lockdown’ and key industrial assets affected. Global growth could face ‘knock-on’ effects, with current growth projections of 3.2% rather than 3.4% in 2020.
The investment specialist added that markets were looking to the Sars epidemic in 2003, with the hope that the coronavirus caseload would begin dying down next month with things coming ‘back to life’ in the second quarter and back to normal business by the summer.
But in a note of caution, he said: ‘For now it all looks a little bit too easy and I’m not sure we have reached the peak impact yet and we are going to start to have companies numerate the impact.’
Asked about the potential impact on the economies of Jersey and Guernsey, he suggested that they could be relatively unaffected due to the limited number of inbound Chinese tourists and outbound exports. Financial services would continue to ‘sail on’. ‘To that extent, I would have thought the risk to your domestic economies is going to be relatively limited,’ said Mr Wyn-Evans.
Janwillem Acket, chief economist at Julius Baer, also said that the Chinese economy would face a weak first quarter with the coronavirus being ‘a drag on growth’. But it remained to be seen what longer-term effect there could be, with Julius Baer still positive about growth figures for China, although ‘value chains’ could be disrupted internationally.
‘If you have production of iPhones in China and Apple exhausts its stocks of finished products, it might have a problem to deliver further units into the market. So it could also mean a loss of sales for companies like Apple as an example,’ said Mr Acket.
‘That of course also can impact developed economies like the US or companies that actually were banking on certain deliveries and didn’t get them out of China.’
But Mr Acket was overall optimistic that the situation could be controlled and would not derail the global economy. He was speaking during a recent visit to Guernsey, where he spoke at a market outlook event held by the Swiss wealth management group.