Paranoia is a natural reaction to human disease outbreaks. Has he got it? Has she?
Markets are reacting with similar jitters around the coronavirus.
Recalling what happened with SARS in 2003, investors are selling out of shares in any hotels, retailers and airlines exposed to China. As US hedge funder John Tudor-Jones put it: “If I were an investor, I’d be really nervous.”
The true impact of such outbreaks, though, rarely turns out as bad as the fear.
While it’s risky to make a call so early on, fund managers with investments exposed to China, Hong Kong, Thailand and Vietnam have no choice. So, what are they doing?
Short-term investors are moving out fast, but money with a longer view is, rightly, staying.
So far, the coronavirus does not seem as deadly as Sars, and the Chinese government has clearly learned lessons from previous outbreaks.
It has been faster to go public and restrict travel, major detection efforts are in place and hospitals are better able to treat the sufferers.
There’s good reason to bet, then, that this is not a 2003 rerun.
Even if it does turn out that way, those taking a longer view still have cause to hold on to their Asian investments.
In 2003, the Chinese stock market fell behind global peers during the outbreak but bounced back to par in just six months.
China is a broader-based, stronger economy now. That should make it even more likely to rebound this time.
Investors shouldn’t turn a scare into a panic.