Coronavirus: Establishing The Nexus Between A Bug and Global Equity Markets

Proshare

Friday, February 28,  2020   /05:43 PM  / By Proshare Research / Header Image Credit: Quartz

 

The coronavirus pandemic, which emanated from China, is rapidly spreading to several other countries and continents.  About 50 countries in the world have reported cases of coronavirus. It has become clear that the virus will have a negative spill-over effect on major equity markets around the world, with backlash within the week being the worst since 2008.

 

Table 1: Recent Global Stock Market Indexes

S/N

Markets

Country

31-Dec-19

27-Feb-20

28-Feb-20

YTD (%)

Today (%)

1

S&P/TSX Composite Index

Canada

17098.56

17041.92

16717.44

-2.23%

-1.90%

2

All Share Index

Nigeria

26842.07

26808.24

26216.46

-2.33%

-2.21%

3

All Ordinaries

Australia

6810

6511.5

6511.5

-4.38%

0.00%

4

IPC

Mexico

43541.02

41607.42

41607.42

-4.44%

0.00%

5

Nasdaq

USA

8972.6

8566.48

8566.48

-4.53%

0.00%

6

Swiss Market Index

Switzerland

10616.94

9816.24

9913.61

-6.62%

0.99%

7

SSE Composite Index (Shanghai)

China

3084.69

2880.3

2880.3

-6.63%

0.00%

8

Taiwan Weighted

Taiwan

12100.48

11292.17

11292.17

-6.68%

0.00%

9

Straits Times (STI)

Singapore

3238.07

3011.87

3011.08

-7.01%

-0.03%

10

^KLSE

Malaysia

1595.83

1482.64

1482.64

-7.09%

0.00%

11

SSE 180 Index (Shanghai)

China

8972.92

8    8323.1

8323.11

-7.24%

0.00%

12

S&P/MIB Index

Italy

25890.37

24747.22

23890.23

-7.73%

-3.46%

13

S&P500

USA

3230.78

2978.76

2978.76

-7.80%

0.00%

14

MerVal

Argentina

41671.41

38390.84

38390.84

-7.87%

0.00%

15

NIFTY

India

12182.5

11633.3

11201.75

-8.05%

-3.71%

16

MICEX Index

Russia

3050.47

2915.84

2801.28

-8.17%

-3.93%

17

Hang Seng

Hong Kong

28499.5

26129.93

26129.93

-8.31%

0.00%

18

KS11

South Korea

2176.67

1987.01

1987.01

-8.71%

0.00%

19

Dow Jones Ind. Avg.

USA

28538.44

25766.64

25766.64

-9.71%

0.00%

20

DAX

Germany

13249.01

11775.79

11934.79

-9.92%

1.35%

21

AEX General

Netherlands

604.58

533.16

540.77

-10.55%

1.43%

22

Nikkei 225

Japan

23656.62

21142.96

21142.96

-10.63%

0.00%

23

CAC 40

France

5978.06

5268.06

5336.18

-10.74%

1.29%

24

BEL-20

Belgium

3955.83

3459.54

3520.14

-11.01%

1.75%

25

Bovespa

Brazil

115645.3

102983.5

102327.66

-11.52%

-0.64%

26

^JKSE

Indonesia

6271.11

5452.7

5452.7

-13.05%

0.00%

27

FTSE 100

UK

7542.44

6490.47

6553.85

-13.11%

0.98%

28

ATX

Austria

3186.94

2730.98

2768.4

-13.13%

1.37%

Source: Rediff/Bloomberg/Proshare

 

The twenty-eight (28) global stock markets reviewed all showed a dip in their year-to-date performances.

 

The top five stock markets that recorded the highest dips were Austria's ATX, U.K's FTSE 100, Indonesia's JKSE , Brazil's Bovespa and Belgium's BEL-20 which dipped by -13.13%, -13.11%, -13.05%, -11.52% and -11.01% respectively (see Table 1).

 

The top largest economies in the world have been greatly hit by the adverse effect of the coronavirus. Large economies such as U.S, China, South Korea, Japan and Germany have been negatively affected by this pandemic.

 

U.S (Dow Jones Ind. Avg) -9.71%

  • U.S Dow Jones year-to-date performance was bearish with a change of -9.71%. Since the outbreak of the coronavirus there has been an increase in travel restrictions around the globe and disruptions in global supply chains. The bearishness in the Dow Jones performance could be attributed to the increase in sell-offs caused by the fears and uncertainty which has created more panic as investors are rushing into less risky investments, such as government bonds.

Chinese (SSE 180 Index) -7.24%

  • The Chinese SSE 180 index year-to-date performance was bearish with a change of -7.24%. People's Bank of China injected 1.2tn yuan worth of liquidity into the markets via reverse repo operations and also cut its interest rate on its one-year medium-term lending facility (MLF) loans in order to boost their economy and cushion their stock market against the negative effect of the stock market. Despite these efforts by the Chinese government there is still investors sentiments as investors are pessimistic given the slow rate at which factories are re-opening, low expected corporate earnings, slow demand in the economy as a result of restrictions in movement and activities as well as the increase in the number of new cases recorded.

South Korea (KS 11) -8.71%

  • South Korea KS 11 recorded a bearish year-to-date performance of -8.71%. South Korea is the nation with the highest number of COVID-19 cases outside China. Investors in South Korea are pessimistic about the outlook of their economy given the rapid spread and contagion of the coronavirus. Despite the increase in the number of cases, the central bank is yet to ease its monetary policy. There is widespread fear and panic in the country as Hyundai motor recently shut a factory in Ulsan, after a worker tested positive. Hyundai has five car factories in Ulsan, which accounts for nearly 30% of its global production. Also, industry heavyweight Samsung electronics announced that a coronavirus case had been confirmed at a mobile factory complex which resulted in the shut-down of the entire facility.

Airline stocks in South Korea have also recorded a dip in their stocks as there has been an increase in fears of contagion.

Japan (Nikkei 225) -10.65%

  • The Japanese Nikkei 225 recorded a bearish year-to-date performance of -10.65%. The fall in the Japanese Nikkei 225 can be attributed to fears, panic and uncertainty caused by the outbreak of the coronavirus in the country. There has been a decline in the consumer confidence in Japan as a result of the outbreak of the coronavirus. The Japanese economy relies a lot on its export and since the outbreak of the virus in China (one of its major exports destination) there has been a slowdown in its export demand. Amidst the coronavirus, the Japanese economy is plagued with internal problems such as low consumption and demand as a result of the increase in the consumption tax to 10% and decrease in capital expenditure.  The central bank in Japan is yet to embark on any monetary easing policy despite these challenges. These factors have culminated and caused pessimism in growth outlook of the Japanese economy adversely affecting its stock market.

Italy S&P/MIB Index -7.73%

  • The Italian S&P/MIB Index was bearish at -7.73%. Before the outbreak of the coronavirus in Italy, the Italian economy was already a perpetual source of concern for Europe, as it had experienced slow growth over the last decade with growing levels of public debt and banks troubled by rising bad loans. The slow growth in the economy had a poor effect on its stock market. The outbreak of the coronavirus in the country is predicted to worsen its economic situation and deepen its weak market outlook. It is expected that there will be an increase in anxiety among investors who would prefer safer local investment havens such as government bonds and securities.

Table 2: African Stock Market

S/N

Markets

Country

31-Dec-19

28-Feb-20

YTD (%)

1

Egypt

EGX 70

534.47

1209.27

126.26%

2

Kenya

FTSE ASEA PANAFRICAN Index

1075.14

1300.48

20.96%

3

Botswana

DRSI

1054.79

1088.71

3.22%

4

Botswana

DCI

7494.55

7598.72

1.39%

5

Morocco

Casablanca

12171.9

12294.56

1.01%

6

Tunisia

Tunisia BVMT Index

7131.71

7171.31

0.56%

7

Mauritius

SEMTRI

8309.75

8330.89

0.25%

8

Mauritius

SEMDEX

2177.09

2177.25

0.01%

9

Mauritius

SEM7

429.86

429.37

-0.11%

10

Lusaka

All-Share Index

4264.51

4246.75

-0.42%

11

Botswana

LASI

843.79

839.66

-0.49%

12

Kenya

FTSE NSE Kenya Govt. Bond

97.5

96.89

-0.63%

13

Botswana

FCI

1562.43

1551.35

-0.71%

14

Botswana

FRSI

777.91

772.09

-0.75%

15

Tanzania

Dar es salaam Stock Exchange All Share Index

2059.21

2036.87

-1.08%

16

Ghana

GSE Composite Index

2254.61

2180.31

-3.30%

17

South Africa

Industrial 25

69349.97

66877.32

-3.57%

18

Malawi

 Malawi All Share Index 

30252.2

29162.28

-3.60%

19

Uganda

All-Share Index

1800.72

1724.47

-4.23%

20

Egypt

EGX 100

1398.1

1311.08

-6.22%

21

Egypt

EGX 30

13961.56

13008.94

-6.82%

22

Kenya

FTSE NSE Kenya 15 Index

221.31

204.76

-7.48%

23

BRVM

BRVM-C

159.24

145.47

-8.65%

24

South Africa

JSE Top 40 Tradable Index

51039.98

46471.57

-8.95%

25

Kenya

ALL SHARE INDEX

166.41

151.49

-8.97%

26

Namibian

NSX Namibia

1306.3

1187.179

-9.12%

27

Kenya

20 SHARE INDEX

2654.39

2409.53

-9.22%

28

BRVM

BRVM-10

149.11

135.23

-9.31%

29

South Africa

JSE All Share Index

57084.1

51704.4

-9.42%

30

Kenya

FTSE NSE Kenya 25 Index

229.49

207.85

-9.43%

31

Egypt

EGX20 Caped

16350.32

14756.81

-9.75%

32

South Africa

Financial 15

15689.42

13691.62

-12.73%

33

South Africa

Resource 10

49418.41

42787.11

-13.42%

34

Zimbabwe

All Share Index

766.34

479.92

-37.38%

35

Rwanda Stock Exchange

RSE ASI

316.66

150.41

-52.50%

Source: Reddif/Bloomberg/Proshare Research

 

Thirty-five African stock markets year-to-date performance played up the mirror images of global equity market patterns. Among the 35 stock markets examined twenty-seven (27) stock markets were negative(positive), i.e. they dipped while eight (8) stock markets were positive(green). The stock markets with the highest gain in year-to-date performance are Egypt's EGX 70, Kenya's FTSE ASEA PANAFRICAN Index, Botswana DRSI, Botswana DCI and Morocco's Casablanca which recorded gains of +126.26%, +20.96%, +3.22%, +1.39% and +1.01% respectively while the top African stock markets that recorded losses are Egypt's EGX20 Caped, South Africa's Financial 15, South Africa Reseource10, Zimbabwe's All Share Index and Rwanda's Stock Exchange all recorded bearish change of -9.75%, -12.73%, -13.42%, -37.38% and -52.5% respectively (see Table 2).

 

The latest information reveals that only two African nations, Algeria and Nigeria, have recorded one case each of coronavirus.  Although the negative effect caused by coronavirus on the stock markets of some large economies such as the U.S, China, South Korea and Japan, the effect of the outbreak is yet to be felt by the majority of African stock markets. Gain and losses in African stock markets could be instead attributed to the possible uniqueness and peculiarity of their stock markets and economy.

 

Table 3: Sector Index W-O-W Performance

Market Performance – Sector Index

Sectors

21-Feb-20

28-Feb-20

WoW Chg

NSE ASI

27,388.62

26,216.46

-4.28%

NSE-30

1,204.42

1,148.03

-4.68%

NSE Consumer Goods

476.30

458.03

-3.84%

NSE Banking

357.65

315.50

-11.79%

NSE Insurance

126.71

116.30

-8.22%

NSE Oil and Gas

239.12

234.01

-2.14%

NSE LII

1,885.76

1,866.92

-1.00%

NSE-IND

1,201.64

1,214.60

1.08%

NSE-ASeM

734.99

734.99

0.00%

NSE Pension

1,028.66

983.71

-4.37%

NSE Premium

2,336.11

2,249.86

-3.69%

NSE Main Board

1,082.66

1,029.69

-4.89%

NSECG

1,023.88

934.02

-8.78%

NSEAFRBVI

977.40

866.93

-11.30%

NSEAFRHDYI

1,461.11

1,384.51

-5.24%

NSEMERIGRW

1,260.42

1,191.70

-5.45%

NSEMERIVAL

1,552.22

1,449.91

-6.59%

Dangote Index

89.75

89.75

0.00%

Elumelu Index

90.29

83.19

-7.86%

Source: Reddif/Bloomberg/Proshare Research

 

Nigeria recorded its first case of coronavirus in Lagos on 27th February 2020. The effect of the outbreak in Nigeria will likely cause increased speculation and anxiety in the stock market.

 

The Nigerian stock market extended its downtrend as Investors Lost N610.64bn week-on-week while the NSEASI Dipped by -4.28% To Close the Week Negative. The sector indices all ended the week lower except the NSE Industrial Goods Index, which turned bullish by +1.08% while the NSE ASeM Index closed flat.

 

The significant losses recorded within the week dampened overall market performance, which was led by the Banking Index, NSE-AFR Bank Value Index, NSE CG Index, Insurance Index, which closed at -11.79%, -11.30%, -8.78% and -8.22% respectively. On the flip side, a gain of +1.08% was recorded in the Industrial Goods sector, thereby making the index the sole gainer during the week.

 

The Dangote and Toni indexes both showed weak performances; the Dangote index closed flat while the Toni index grunted bearishly at -7.86%, this was precipitated by selloffs in heavyweights which led to UBA, TRANSCORP and UBCAP ending the week with large dips in their prices by -9.46%, -5.38% and -3.77% respectively.

 

Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.


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