Though China A share market is still closed for Holiday, most investors have already felt anxious and worried due to the outbreak of coronavirus and the plunging of stock markets around world. There’s no doubt that China A will open low, but what actually makes people panic is the toll coronavirus will take on the China economy.
In times of panic, we need to calm down and think in reverse. Will the influence of coronavirus outbreak exceed that of China-U.S. trade conflict? Will it be even severer than SARS in 2003? Does this provide another chance to buy stocks at lower price?
Take the analysis of medical expert Academician Nanshan Zhong on the outbreak:
“In about one week or ten days, the outbreak will reach its peak and will no longer increase in an alarming scale.”
“SARS lasted for about five to six months. However, I believe the novel coronavirus will not last that long.”
Black swan events happen every year, affecting market sentiments and trends. But they seldom change the big picture. These events bring only short-term impacts. Take the U.S.-China trade conflict as an example. It has caused much severer effects than the coronavirus this year and SARS in 2003. Though the economy was hit hard and stock market was gloomy in 2018, stock price surged again in 2019. The SSE 50 index closed at 11 year high.
The panic caused by coronavirus created an opportunity for new capital to buy in stocks with lower prices. Kweichow Moutai can be bought under 1,000 RMB per share. ICBC can be bought under 0.8 PB ratio. The risk-return ratio is getting better, not worse. Some investors are selling off their stocks, but others are rushing in.
We think the coronavirus panic would press down stock prices and drive up volatility, but the influence would only last for months. It is not comparable to the U.S.-China trade conflict. China’ economy prospect will not change, neither will China A share. The market should soon recover from the “panic attack” and it’s leaving investors not much time to take action.
Our strategy of investing blue-chips and actively participate in IPO placement will not change. We have been holding full position in stocks since mid of 2016, and will continue to hold full position in stocks.
When you face the outbreak, you can choose to lock down the information, or work together to fight for it. You can choose to discriminate people coming from the epidemic area, or passionately offer support. When you face the market plunge, you can choose to sell off stocks in panic, or stay in course with rationality. You can choose to redeem funds, or you can bravely make more application. It’s the choice you make at these critical moments that dictates where you stand in life and wealth.
For investors who want to make fund applications during the panic, we believe fund with high stock position is better, because your application price would be the closing price of the market.
Minority AM client service WeChat and phone service are full functional. Staffs are on duty for key positions, others are working remotely. We will closely watch the market and take various risk management measurements for our products when needed.
Let’s get revitalized and go through the market storms again.