Chernobyl in China or the Spanish flu?

Sew! Sew like the wind! This photo taken on Feb.28, 2020 shows workers sewing dangerously … [+] Material suits for the COVID-19 coronavirus outbreak at the Zhejiang Ugly Duck Industry clothing factory in Wenzhou. (Photo by NOEL CELIS / AFP via Getty Images)

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China’s coronavirus has the world on the verge of it. It has been compared to the meltdown of the Chernobyl nuclear reactor in the Soviet Union, as China responded poorly early in December when doctors warned of a pathogen of unknown origin discovered in a patient in Wuhan, a city of around 11 million people, and were immediately jailed for it.

It’s pretty bad out there.

On Saturday, France surpassed Germany as the second largest nation in Europe to become infected with the new Covid-19 virus. You have 57 cases. Italy is closer to 1,000 today at 889. The US now has four more at 64.

There are 85,409 people infected with the mildly common Covid-19, 79,251 of whom are all in China. 66,337 of these are in Hubei – the epicenter. The meltdown, if you will.

It all depends on China’s government to get this right.

“We believe (Xi Jinping) still has enough firepower to withstand challenges as long as the economy doesn’t collapse and key state and military players continue to see it in their best interest to stay on his side,” he says Fenby, chairman of the China team at TS Lombard. “Whatever the online chatter and the broadsides of some outspoken academics, the opposition is disorganized and the authorities have tirelessly suppressed dissent.”

That’s true. Good luck chatting with your mainland Chinese friends via WeChat. One would have to know the equivalent of pork latin in mandarin to know what people were really thinking.

After Chernobyl, Soviet leader Mikhail Gorbachev introduced more transparency to prevent future cover-ups that he feared would weaken the Soviet Union. In contrast, Beijing controls its handling of the coronavirus more strictly. Xi has contained the media and the flow of information while further centralizing power. If there is a man with skin at play in this fight against Covid-19, it is Xi ..

“The result is likely a reversal of the Chernobyl effect that the ruling party developed on its way to the rescue – in line with the extremely negative assessment of Gorbachev’s attempts to reform the former Soviet Union,” says Fenby.

US ECONOMY NYSE Markets Market

A trader reacts on the wall during the opening bell on the New York Stock Exchange on February 28, 2020 … [+] Street in New York City. Losses deepened amid fears of a coronavirus outbreak in California. (Photo by Johannes EISELE / AFP)

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Yesterday’s Wall Street sell-off was buzzing when California Governor Gavin Newsom said 8,400 patients had been tested for possible Covid-19 infections.

It is noteworthy that South Korea tested positive over 10,000 patients and 315 patients in one day on Friday. If the same percentage tested positive in California, the state would have over 250 people with the disease. That would certainly panic the markets and could lead to travel restrictions. if not enforced, then surely self-imposed.

The negative impact on Chinese growth was reasonably expected, but recent news highlighting outbreaks near some of Europe’s financial and manufacturing hubs has increased uncertainty.

– by Joshua Kutin, Head of Asset Allocation, and Anwiti Bahuguna, Portfolio Manager, Columbia Threadneedle Investments

In addition, Japan reported that a recovered patient tested positive again after being released. This confirms several reports from China that the virus is recurring in allegedly “recovered” patients.

“We now believe that the best analogue of the novel coronavirus is the 1918-1920 Spanish flu epidemic,” said Vladimir Signorelli, head of Bretton Woods Research, a macro-themed investment research firm. “The loss of activity for China, where hundreds of millions are quarantined and migration statistics suggest 70% of people have not yet returned to work, sounds very similar to the American experience a century ago.”

In short, it was chaos.

We have come a long way since the 1920s and have learned a lot about public health and hygiene since then.

China will learn a lot from it. The global supply chain, which has long been dependent on China, is feeling its growing pain. The new coronavirus could be more problematic for China than the trade war.

“This will disrupt the global economy more than originally expected. It’s already filtered down to the result, ”said Joshua Kutin, director of asset allocation at Columbia Threadneedle Investments.

SKORA China Health Virus

Medical members wearing protective clothing collect samples from drivers suspected of having symptoms of the … [+] COVID-19 coronavirus at a drive-through virus test facility in Goyang, north of Seoul, on February 29, 2020. (Photo by Jung Yeon-je / AFP)

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The Spanish flu broke out as World War I ended. The breakout resulted in only an 11% sell-off for stocks.

Since Apple announced on February 18 that it would miss sales forecasts due to factory closures in China, the S&P 500 and Dow Jones Industrial indices have lost between 13% and 15%.

Apple CEO Tim Cook said Friday on Fox Business Network that he was “optimistic” that his factories would be back to work this week.

“We’re probably near bottom provided the total number of cases (in China) doesn’t rise, even if numbers outside of China do,” Signorelli says.

Vincent Nichols, an emerging markets money manager at BNP Paribas Asset Management, said it was like a black swan event. He called it a “gray swan”.

“As an investor, we know that there are opportunities to buy in all of this,” he says. “I have no definite idea where the outbreak will lead. Because of this, I’m now more underweight in China than I was a few weeks ago. “

There is some good news from China.

Although China was slow to lockdown Hubei province during the New Year holidays, travel restrictions and other measures managed to keep the majority of infections in Hubei after it teamed up.

Indeed, when people return to work, millions will be directed towards Beijing and Shanghai, with fewer than 200 cases between them. A total of 40 million people live in these two cities. Cannot add thousands of cases to the number of coronavirus inpatients in the next two weeks or the panic will worsen.

Aside from another outbreak in Wuhan – an all-out black swan – Hubei will finally have more people who have recovered from Covid-19 than will be treated in March.

As of Saturday night in China, there have been 34,617 cases and 28,993 people in Hubei who have recovered.

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