*OspreyFX would like to state that traders should research extensively before following any information given hereby. Please read our Risk Disclosure for more information.
Coronavirus: The Positives Amidst All The Negatives
The rapid spread of the novel Coronavirus COVID-19 has left the global markets in a boggling state. In this article we look at:
- How coronavirus is slowing down Chinese markets and in turn affecting the international economy.
- The surprising positive effects of coronavirus on the different markets
- How will the global economy be different following such a major crisis?
Coronavirus’s negative slowdown of the Chinese market
China is the world’s second-largest economy and its performance impacts international markets directly.
US-China trade relations, the closure of Chinese factories and the growing pressure on the global supply chain. Coronavirus adds to the negative effects of the Chinese economy. The People’s Bank of China is reducing interest rates and pushing an additional 1.2 trillion yuan into the Chinese banking system. This is done in a bid to boost the country’s economy. However, other factors are still stressing the Chinese economy.
The paralysis of the tourism industry – which accounts for 6% of China’s GDP – and the limited movement in and out of China itself from other countries does not bode well for China’s growth this year. This has resulted in China’s currency weakening against other currencies.
Furthermore, recent reports that the number of confirmed new cases in China appears to be slowing has inspired some optimism in the markets. However, experts have also warned that the crisis may have not yet reached its peak. Speculations that coronavirus may inspire other economic slowdowns are rife.
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But what are the positives in this international crisis?
Contrary to popular belief, the effects of the coronavirus on global markets aren’t all negative.
The US dollar has been boosted by its safe-haven appeal during the coronavirus epidemic. Assets with high liquidity will attract investors with US Treasuries gaining significant support as they remain the most liquid global asset.
Cryptocurrencies with Bitcoin Trading is close to 2-Month highs. The local fintech market saw technology leveraged to help during the outbreak. Ant Financial’s My Bank announced discounts on company loans. Also, fintech giants like Ten cent and Baidu offered financial support to merchants being treated in hospitals for the virus. Blockchain is also easing the pressure on healthcare workers by speeding up medical data verification and cashless payments are being encouraged to prevent the spread of the virus.
Could Covid-19 lead to a new economic balance?
History suggests that after a major crisis like this one the global economy looks different in a number of significant ways. It’s unlikely that business, trade, and economic issues will be resolved any time soon. However, in the long–term, it’s almost certain that confidence and investments will be back to the levels that they were at before the coronavirus hit. Industry actions might be cautious for some time to come.
Whether economies will plunge into a recession or not; the path back to growth in the aftermath of Covid-19 will depend on many variables. The degree to which demand will be delayed or foregone is one factor. Other factors include whether the shock is just a spike or a long-term alteration, or whether there is structural damage. Only time can tell.
*OspreyFX would like to state that traders should research extensively before following any information given hereby. Please read our Risk Disclosure for more information.