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3000 f

Contagion: Cool heads and action needed

3000 f

By Makhulu

Head of the Jamaica Stock Exchange (JSE) Marlene Street Forrest has declared that while some local companies are exposed to what is happening on international markets, seeing that they have holdings of securities from these regions, there might be some impact on local companies and the local stock market.

A visitor wearing a face mask, amid concerns over the spread of the COVID-19 novel coronavirus, visits the Japan Olympic Museum in Tokyo on Feb. 26.

However, she further said that if investors keep cool heads and are analytic in their approach, the degree of loss seen in some global markets should not occur here.

Internationally, markets have lost upwards of US$4 trillion as investors sell off stocks in fear of what the spreading coronavirus will do to companies and the economy at large.

Covid 19, as the latest coronavirus is called, has spread from coast to coast in the United States. The government in that country is yet to concretise strategies to deal with the expected epidemic.

In total, over 88,000 people across the world are confirmed infected with over 3,000 deaths reported. Most are in China where daily infection numbers are declining.

In China, markets responded positively when the government pledged liquidity support as it put in aggressive measures to contain the virus.

In South Korea, where the virus is also spreading, support to industries has also been pledged, with work provided for those who have lost jobs as a result of the virus’s impact on businesses.

An employee stands next to a statue of a bear just outside of a bank in Shanghai, China on Friday, 14 February 2020.

A similar level of determination is yet to be exhibited by governments elsewhere, with communications about the virus being largely placed on the heads of health authorities.

It is expected that when the governments in the United Kingdom, the United States, Italy, and Canada unveil their plans to mitigate market impact, investors may begin to operate with a cooler head.

As it is, US$4 trillion in wealth vanished from the stock markets in the last eight days with investors gripped by panic.

Traders work on the floor of the New York Stock Exchange in New York, U.S. February 26.

The market in the United States entered correction territory, falling 12 per cent as the sell-off continued.

Playing wait-and-see is not an option. While governments in the West like to criticise China for many things, they must, in this case, follow suit with funds backing markets, industry, health care and quarantine efforts.

They must talk about their plans, and in short order, if the panic is to end.

Pedestrians stand in front of an illuminated American flag in the Times Square neighborhood of New York. Photographer: Michael Nagle/Bloomberg

Playing wait-and-see is not an effective strategy. The virus continues to spread, with over 3000 cases now reported in South Korea, 35 in the United Kingdom, increasing numbers in the United States and new cases popping up in the Caribbean, Mexico and Brazil.

Covid 19 is extremely infectious and though the death rate ranges downward of four per cent, it is still a significant disrupter of trade flow and business activity.

Investors are in search of reassurance and hopefully, plans for containment and market support will emerge this week.

If not, some companies might be impacted to the extent of bankruptcy, workers will lose their jobs and economic output will be negatively affected over a longer timeline than is strictly necessary.