US, WASHINGTON (ORDO NEWS) — Credit Suisse memo released yesterday said markets have always “reacted most negatively” to unknown diseases, tending to plunge more during epidemics than during natural disasters such as earthquakes and storms, writes David Wagner on Investing.
Epidemics have resulted in longer and less dramatic market declines and rebounds than crises caused by natural disasters, according to the investment bank, which has studied crises in Asia-Pacific since the year 2000.
The current coronavirus epidemic has been called a veritable “black swan”, that is, an unlikely and unforeseen event. It caused markets, including those in Asia Pacific, to drop 10-12% from recent highs.
“Historically, the market has responded most negatively to unknown diseases, given the associated uncertainty. This can be seen in the recent response to COVID-19, as well as in the SARS epidemic in 2003,” said said Credit Suisse.
“Better understood diseases, such as the seasonal H1N1 flu, have a much smaller impact on the markets, despite significantly higher infections and total mortality (although mortality rates are lower),” analysts wrote. Credit Suisse Will Stephens, Elita Lai and Dave Yin.
However, in such cases, certain actions are better positioned than others to withstand the storm, according to the bank:
“Looking at COVID-19 versus SARS, risky stocks underperformed, while quality outperformed performance in both examples. Value stocks played a safe haven role in the context of SARS , but they are less so now, “he said.
You will therefore find below some “safe haven” actions in Asia-Pacific that the bank’s analysts have chosen for investors seeking to “isolate their portfolios from an additional drop linked to COVID-19”.
These are actions that, according to the bank, “align with the characteristics of actions that have already experienced a crisis in the region”. The declines were calculated from the highest of the year until the end of March 23.
1 Retail giant Seven & i Holdings Co., Ltd. (T: 3382 ): -26.1%
2 The alcoholic beverage company Asahi Group Holdings, Ltd. (T: 2502 ): -37.2%
3 The security management company Secom Co., Ltd. (T: 9735 ): -22%
4 The precious metals company Newcrest Mining Ltd (ASX: NCM ): -30%
5 The telecommunications company Spark New Zealand Ltd (ASX: SPK ): -20.8%
Other Asian markets
6 HDFC Bank Ltd (NS: HDBK ) (India): -39.6%
7 Maybank (Malaysia): -18.6%
8 China Merchants Bank Co Ltd (SS: 600036 ) (China): -23.5%
9 Pharmaceutical company Jiangsu Hengrui Medicine Co Ltd (SS: 600276 ) (China): -11.5% Power Assets
10 Electric Company(HK: 0006 ) (Hong Kong): -28.5%
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