Minerva Focus - Coronavirus.pdf

Overview:
The COVID-19 outbreak, originating in Wuhan, China, presents a significant health crisis with economic and financial repercussions worldwide. With over 80,000 cases and 2,600 deaths across 27 countries, its impact mirrors that of the 2003 SARS epidemic.

Analogies with 2003 SARS Epidemic:
- Economic Share: China's economic significance has grown dramatically since 2003, from 5% to 11% in the MSCI Emerging Markets Index and 4% to 16% in global GDP.
- Impact on Growth: Similar to SARS, COVID-19 led to a temporary slowdown in China's growth rate, with retail sales growing at 4.3% in May 2003 compared to 9.0% in November 2002. Industrial output also dipped to 13.7% in May 2003.
- Trade Volume: Exports were steady during SARS due to increased demand, but COVID-19 could disrupt both imports and exports due to supply outages and logistics issues, according to S&P Global Ratings.

Global Market Implications:
- GDP Growth: S&P Global Ratings forecasts a -0.3% global GDP growth for 2020 due to COVID-19, potentially knocking off $1.1tn in income if the virus spreads further, as per Oxford Economics.
- Affected Industries:
- Airline Sector: IATA estimates a $23.9bn loss in annual revenues with a V-shaped recovery similar to SARS. Chinese airlines could lose $12.8bn.
- Luxury Retailers and Tourism: Chinese shoppers account for 35% of personal luxury goods markets, making them vulnerable. Tourism spending by Chinese citizens, accounting for 20% of global tourism in 2018, will also be hit hard.
- Auto Manufacturers: China's car market, the largest globally for traditional and electric vehicles, will suffer production outages due to plant closures, affecting output by over 1.7m cars.

Energy Sector Impact:
- The decline in passenger traffic in APAC, particularly in China, could mitigate the negative impact on oil prices, which have fallen significantly since late 2019.