The outbreak of a new virus in China has sent shivers through world financial ma...
- The outbreak of a new virus in China has sent shivers through world financial markets, with investors drawing comparisons to the 2003 SARS outbreak in order to assess its potential economic impact.The following factbox collates the estimates of the economic impacts of past such episodes as well as individual company winners and losers from the current outbreak.
Isolating the impact of a single factor on global stock indexes and the global economy is a formidable task: they reflect a multiplicity of simultaneously competing factors ranging from economic data, company performance, and geopolitical shifts. In the middle of the SARS outbreak for instance, the U.S. invasion of Iraq would have exerted an equivalent if not greater impact on price action.
However, price action in markets indicates that the impacts of such outbreaks are limited. After Chinese authorities reported the outbreak of SARS to the World Health Organization in 2003, the MSCI China index of shares decoupled from its global peers - but made up the lost ground in only six months.here
paper by Jong-Wha Lee and Warwick McKibbin estimates the global economic loss due at SARS at $40 billion in 2003. A May 2006 economic briefing by the International Air Transport Association estimated that world gross domestic product suffered a 0.1% hit due to the outbreak.Despite the disruption to the wider economy, virus outbreaks have tended to benefit pharmaceutical stocks, while tourism and travel-related stocks - hotels, airlines and luxury and consumer goods - tend to get punished. During the SARS outbreak, retail sales figures in China showed a marked drop-off as consumer spending took a hit.
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