A layman’s approach to investing in the climate of the Wuhan coronavirus situation
Updated: Feb 27, 2020
The talk of of the town (and rightly so) has been the Wuhan situation, and today the market opened low post-CNY weekend.
I’m nowhere near possessing a proficient knowledge in either economics or finance, but I’ve got some layman observations on some indicators of how the market has been and will be reacting as the situation unfolds.
Here are some totally unqualified but common-sensical (I think) thoughts to how I am approaching this:
We can use the performance of the US markets the night before, to get a sense of how the local market will performance the following day The US indices have been falling consecutively over the last few days, and as the Asian markets were celebrating the Lunar New Year (+ public holidays), we have not been able to move ‘in tandem’ with the US markets. As such when the SG market opened this morning, it was not entirely surprising that one shot everything came out and it opened lower.
The US market fell most likely due to the spread of Wuhan coronavirus Unfortunately the US hasn’t been spared from the virus as well, and the markets were reacting to it.
As such the Asian market would thus most likely fall too. Being in Asia, the local market would also have to account for the coronavirus, along with the fact that Singapore has already reported its 5th (and now 7th) confirmed case.
We are not at the peak yet (i.e. there is still the risk of stocks falling even lower) An ST article quoted a Chinese government expert that the peak could happen in 10 days, although I’m not entirely sure how accurate that number will be, as from a layman’s perspective, it doesn’t look like that will play out in such a short timespan, especially when things are only starting to development at global scale. Another article that I feel is more realistic states that the peak will only happen in March. If this speculation is true then there is a lot more runway for the markets to continue to fall even lower still.
So how do we react? Buy or sell?
Having listed the pointers above, my own perspective is this:
We have conquered plaques and diseases before, and I believe that we will be able to overcome this eventually.
The Spanish Plague. The Black Death. The 2009 Flu outbreak. SARS. MERS. And we’re still standing. I have the faith that eventually things will be okay.
I also feel the following:
The market is irrational, and just like everything else that has passed, the Wuhan flu will not be actively affecting market sentiments in 5 years’ time, just like how the fear of SARS is not affecting the markets now. We will move on. It just so happens that Wuhan is the latest hot topic in the world right now.
Just as a rising tide raises all boats, a receding tide lowers all boats as well. The fact that there was blood on the streets today (and probably more in the next few days / weeks) show that the market is irrational. If it were rational, then only specific businesses related to the virus (i.e. hospitality, healthcare, air travel) would have tanked. The markets should start to bounce back shortly after we start to receive consistently positive news on the development of vaccines and progress against the spread of the virus.
We need to understand our investment objectives, and our investments. Generic advice here. When the markets experience a downturn and we see the value of our investments plummet, it makes good time for reflection. If we have overstretched our investments, then we’d feel the pinch in our heart. But if we have done our due diligence then the downturn should instead make us feel excited and want to invest more instead. Take a health check this period.
There is a need for balance between profits and empathyAs much as this is a potential opportunity to pick up more stocks, we have to also remember that this event is causing a lot of harm, pain, and sadness in the other parts of the world. People are dying. We are very blessed to be a relatively safe spot in the world where the government is proactively try to contain this. In addition, our problems are to worry about whether to buy / sell stocks, rather than fighting for our lives to even get ourselves checked out at the hospital. As much as we develop our portfolio, we must also develop empathy for those in suffering.
So after all that grandfather’s story, what did I do today?
Based on the reasons above, I kind of already expected that the markets would drop today, so I did some homework and got together some tickers and hopeful prices, and I managed to pick up some stocks today.
Although most stocks did not fall as much as I was hoping for, there were a couple that caught my attention:
Fu Yu has been a company I have been interested in, but the stock price promptly shot up recently due to analysts’ coverage. Today it fell back down to its old pricing, and I got some at an average of $2.655.
Wilmar has always been one of my favourite companies due to its vertical structure, but in recent months its gotten quite pricey at $4+. Today it fell to $3.93 and I managed to add more to my current position.
As the news about the virus continue to come in, and as it develops, we can expect more flunctuations in price, and as such more opportunities to buy.