Stock markets’ worst drop in years, increase global spread of COVID-19

| 26 Feb 2020

The spread of the virus in Singapore has seen numbers hovering at 91 with 53 recovered patients. This shows a recovery rate of nearly 58%. The government’s response in containing the virus on our shores and a generous budget stimulus has largely led to the calm of Singaporeans. Over the weekend, crowds began returning to the heartland and central malls. 

However, out of Singapore shores, it paints a less rosy picture. 

While China’s new cases slowed and remained largely flat, showing that it may be reaching near its peak, the spread has increased rapidly across the globe. China’s strong containment efforts have helped to reduce the rate in which the virus has spread within the country. Yet many countries with vulnerable medical infrastructure are now concerned as they may not be prepared to face and contain a pandemic.

Global Spread of COVID-19

Just one week ago on February 19, 2020, South Korea had only reported 46 confirmed cases. However, as of reporting, the numbers have increased passed 1,100 cases. The exponential increase in confirmed cases has led US officials to raise the travel warning to South Korea to the highest levels. This comes shortly after a US soldier at a South Korea military training facility being diagnosed as a confirmed case.

The center of the outbreak in South Korea comes from Daegu. Daegu has seen more than 90% of the new infections in South Korea. 

Similarly, the United States remain jittery as the number reported cases in one week jumped from 15 to 57. 

In Iran, the number of reported cases in one week also jumped from 0 to 95. The Iran Deputy Health Minister has also tested positive for COVID-19. The sudden spike in cases has made Iran one of the most troubling developing hot spots

A top health official from the World Health Organisation has also said that many countries are “not ready” for a pandemic of this scale

Markets take a tumble

The sell-off on Monday (24 February 2020) saw a fall of more than 1000 points in one day. This makes it one of the worst single-day drops in history. Investors looking for a fast rally from the fall will be in for a bumpy ride, as Tuesday closed with yet another fall in The Dow. It fell by more than 800 points in yet another day of sell-offs. The two-day fall saw a drop of more than 1900 points. 

This has broken the momentum for one of the longest bull runs that we have ever seen. The S&P 500 also closed below its 50-day moving average. CNBC reported that “Since Wednesday’s closing high, global markets have lost $2.44 trillion.” 

When COVID-19 was first announced in China and worsened in January, the markets saw only a temporary fall, this happened despite China being one of the largest manufacturers in the world. This shows that investors are only now responding to the fears of COVID-19’s impact only after it has spread globally.

Investors are beginning to price down the stock prices as the virus may cause major supply-chain disruptions after demand falls due to weaker market sentiment. It has also made investors fearful of a possible over-valued technology bubble bursting, worsened by the impact of the COVID-19 virus.

Flood to Safe Havens

The massive sell-offs in the stock market have led to the rise in Gold prices. This comes as people buy the safe-haven commodity instead of being involved in riskier stocks. Gold prices have now climbed to a 7 year high

Other safe havens that are picking up are government bonds and safe cash parking facilities like endowments. Diversification is key in these uncertain markets. Safe investments provide an anchor during this period of volatility with guaranteed and safe returns. 

You can purchase our Singlife Endowment policy with 2.25% guaranteed returns for 3 years or eEasy save V by Tiq Savings Insurance with 2.68% guaranteed returns for the first 6 years. Express your interest by 29 February 2020 to be eligible for our current promotion. Read more here

Submit your interest now and receive $50 CapitaLand Vouchers!

Rennes Lee

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