Stock investors immune to virus scare

Editorial | Mary Ma 13 Feb 2020

If people just looked at the various indices of the stock markets here, in the mainland and Wall Street, it would appear that the new coronavirus epidemic that is causing such alarm around the world is all but over.

Since the markets crashed after their respective Lunar New Year holidays, the mainland's CSI-300 Index and the Hang Seng Index have been rising steadily to recover a large part of the losses suffered during those single days.

The upward tick continued yesterday, with the CSI-300 ascending to a point above 3,984 and the HSI rising to higher than 27,800.

Seems everything is alright again - but that's far from the truth.

Investors were probably speculating on mainland infectious disease expert Zhong Nanshan's optimistic prediction that the new virus that first broke out in Wuhan before spreading to other places may very soon peak and peter out one or two months later.

While it is obviously also my wish to see an early end to the disease that has virtually frozen China, my fear is that Zhong may be too optimistic.

Should it have been made the cardinal principle that - in dealing with a public health emergency that has so far officially sickened more than 44,000 people and killed over 1,100 - it is better to be safe than sorry, especially when the actual tallies could be higher?

Will the epidemic be over in April or the middle of the year? I don't have the answer, but I'm certain the country's economic growth is being dealt a massive blow.

So how is it possible for average companies to be so profitable to justify their share prices? The question mark is too obvious to miss. These amazing things are only possible in stock markets, not in the real economy.

China has locked down most of its cities with no exceptions made for even the most crucial ones, including Beijing, Shanghai and Guangzhou in addition to Wuhan and others.

The lockdown policy is being enforced with unprecedented severity.

Meanwhile, Beijing is also instructing factories to resume production - meaning workers are hitting the road again to return to factory-based cities.

The two policies are contradictory to each other, yet Beijing is forced to contradict the quarantine need with directives to resume factory production.

The policy contradiction serves to reveal how gloomy the economic outlook must have become for the country's leadership.

It had been China's target to maintain growth of around

6 percent this year. Now it would require a miracle to achieve that. Indeed, it would be tremendous if the mainland could achieve growth of 5 percent when the year ends.

By the same token, the suspension of casinos in Macau is due to expire soon.

However, will there be customers at the gambling tables even after they are reopened as planned when most mainlanders are still banned from moving around or crossing the border to the south?

Before us is an eye-opening example of how disconnected from the real world financial markets can sometimes be.

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