China’s Deputy Prime Minister Sun Chunlan speaks of “conditions like in times of war”, which would come to the country. Next days decisive
For the stock markets, the crucial question now is: how quickly will the coronavirus continue to spread, and subsequently: how long will China stand virtually still. Official figures from China most likely do not accurately reflect reality (for a variety of reasons: from overburdening the Chinese health care system to covering up the spread through the Beijing government to avoid panic). Therefore two central hubs directly bordering mainland China are now of central importance: Singapore and Hong Kong.
Both Singapore and Hong Kong have, in all probability, much more reliable methods of detecting infections. In addition, both countries have at least the first signs of a free press and the respective governments are much more transparent than authoritarian Beijing. Singapore, in particular, is considered by scientists to be exemplary in terms of disease control and transparency. To a certain extent it has Western standards at a high level in this area.
“Orange Alert” in Singapore
Now, a few minutes ago, Singapore raised the alert level to “orange”. This is the same level as once during the SARS wave (thus still below the “red” level that marks the outbreak of a pandemic). The alert level was raised because three residents of Singapore became infected with the corona virus. They had not travelled to mainland China. They were not related to any registered infected persons in Singapore.
In Hong Kong, the number of people infected is still low. Although the Lam government has now closed the borders with mainland China. For the stock markets, the decisive factor now is whether infections in Singapore and Hong Kong will increase. And of course especially in the USA. Wall Street believes that the effects of the coronavirus are only temporary (with a subsequent strong rebound due to the catch-up effects) as long as infections in the US do not increase and thus directly affect the US economy. However, if “reliable” governments such as Singapore and Hong Kong report a stronger increase in infections, this is likely to make Wall Street nervous as well.
Conditions like in wartime
Beijing, on the other hand, assumes that it is now in a decisive phase. China’s Deputy Prime Minister Sun Chunlan speaks of “conditions like in wartime” that are coming to the country. During a visit to Wuhan, Sun said: “There must be no deserters, otherwise they will be nailed to the pillar of historical shame forever”. Wuhan, a megacity of 11 million, has now mutated into a ghost town, as drone recordings show.
Meanwhile, more and more Chinese importers are proclaiming the “force majeure”. They refuse to accept copper deliveries, for example, because of the collapsing demand in China. Beijing, on the other hand, has announced that it wants to resume key tech production under the strictest security measures.
Perhaps the developments over the weekend will decide whether the stock markets will correct more strongly. Or not, if the situation does not escalate further.