Will we get the better of coronavirus? 13-03-2020

Coronavirus is now everywhere

The virus has spread to every continent and the number of confirmed cases is rising

The spread of the virus seems to be under control in China and South Korea. Elsewhere it's a case of 'safety first'. Drastic measures have been taken, with Italy in lockdown and the United States imposing entry restrictions on certain European nationals.

Not enough is known about the virus itself. Concerted efforts are being made to develop a vaccine but that won’t happen in the next few months.

European Central Bank takes targeted measures

There is little point in cutting interest rates further. The European Central Bank is, however, taking specific measures. It is pumping 120 billion euros into the economy by buying up bonds. Banks can grant cheaper loans to small and medium-sized enterprises.

Stock markets have undergone a sharp correction. The situation is changing from day to day. The tourism and aviation sectors are suffering the biggest losses.

The stock markets are factoring in a very sharp slowdown in growth, but no crisis in the financial system.

What can we do?

The first quarter of 2020 has been lost. It is difficult to estimate when the virus will be brought under control and what the exact economic impact will be. The fact is that both the virus and its consequences will be temporary. The improved situation in China and South Korea gives us something solid to go on.

We still favour shares, but are waiting to see how the situation pans out before quickly building up the reduced holdings again. Within the shares component, we are opting for more defensive sectors and going for emerging markets, given that the coronavirus has already passed there.

Tom Mermuys, Senior Investment Strategist KBC Asset Management
"Panic has never been a good counsellor. If you're worried about the recent fall in share prices, it might be useful to examine the composition of your portfolio again further down the line. However, there's no rush to do so."
Edited to 13 March 2020. This document is a publication of KBC Asset Management NV (KBC AM). The information may be changed without notice and offers no guarantee for the future. No part of this document may be reproduced without the prior express written consent of KBC AM. This information is governed by the laws of Belgium and is subject to the exclusive jurisdiction of its courts.