The Chinese authorities appear to be operating with full transparency and increased decisiveness, which bodes well for the likelihood of successful control.
The Emergency Committee of the World Health Organisation met on 23rd January1, to consider the outbreak of a new strain of the Coronavirus, which originated in Wuhan, Central China. The committee decided to continue monitoring the situation and to review whether or not this constitutes a Public Health Emergency of International Concern (PHEIC). This new strain of the coronavirus is denominated nCoV-2019 and appears to be similar in character and in mechanism of infection to the SARs virus, which exploded across Asia in 2002-2003.
Chinese researchers say they have matched the genetic sequence to one found in bats. We know that viruses can jump from wild animals to humans in markets where these animals are kept for sale and one such market appears to be the origin of this outbreak.
The spread so far
Within China, the spread of the disease has without doubt been facilitated by the customary travel plans of Chinese people ahead of Lunar New Year, which is a bit like a mix of Thanksgiving and Christmas in the United States and Europe. Many cities in China have reported cases and suspected cases and there have already been reports of cases in the US and Europe.
Source: Statista and Word Health Organisation, Centers for Disease Control and Prevention
Wuhan is a city of around 11 million people in central China, the capital of Hubei province. It is well known for its prestigious engineering university, its entrepreneurial companies and its status as China’s happiest city2. It has attracted foreign investment and many smart young people from all over China. Around a quarter of the population is estimated to have come from elsewhere and the student population represents a significant proportion of these. The city has grown fast over the last decade and there are some who say that investment in healthcare infrastructure has lagged investment in housing and other sectors. The city is now effectively closed to the outside world, with departures banned by the authorities, in an effort to contain the spread of the illness.
The central government’s attitude has been a complete contrast to the operating model at the time of SARs, when there was denial and obfuscation for the first few months. Indeed, an edict has been issued to all local level government employees that they are bound to be transparent about the disease, its spread and its mortality rate. The military medical corps has been made available to help deal with the sheer numbers of people who are queuing at hospitals because they fear having been infected. Travel restrictions are now in place across 11 cities; Beijing appears to understand the need to win the trust of the population after the mishandling of SARs. International experts have been applauding the government’s response.
The markets’ reaction
Unsurprisingly, the Chinese equity markets have been weak, possibly exacerbated by selling pressure ahead of the Lunar New Year. The markets are closed between January 24th and 30th but the sell off has already hurt all the predictable sectors – airlines, airports, cinema theatres, retail, cruises, lodging, gaming, tourism in general. Building on the experience of SARs, investors expect this outbreak to be less damaging to economic growth because of the authorities’ reaction time and the measures deployed. Although there was a move upwards in many healthcare stocks, the fact is that there is no company who stands to benefit cleanly from this situation. The reason is that there is no vaccine, so the only thing to do is to rest and treat the symptoms: Keep hydrated, take pain or fever medication and in some cases oxygen to assist breathing. If we consider how the market behaved around SARs, those names that were sold off eventually bounced strongly once the outbreak was declared over, so I’m sure there will be many people trying to time their (extremely short term) investments accordingly.
1World Health Organisation https://www.who.int/news-room/detail/23-01-2020-statement-on-the-meeting-of-the-international-health-regulations-(2005)-emergency-committee-regarding-the-outbreak-of-novel-coronavirus-(2019-ncov)
2Statista, The Happiest Cities in China https://www.statista.com/chart/13213/the-happiest-cities-in-china/
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