Coronavirus Puts These Country ETFs on High Alert

As we all know, the coronavirus outbreak is no longer specific to China. With China accounting for about 16% share of the global economy, the extent of financial loss is imaginable.

While the progression of the disease is being monitored every day, the latest data is not encouraging at all. Most recently, the number of deaths and new cases rose dramatically after authorities altered the procedure of counting infected people. This triggered concerns that the “severity of the outbreak has been under-reported.”

Experts are forecasting that global economic growth in 2020 will drop 0.2% to 0.3%, while the U.S. first quarter growth could slow down by 0.2% to 0.4%. Moody’s Analytics and Barclays both expected the outbreak to hurt global GDP by 0.3% in 2020.

If the situation worsens, it could deal a huge blow to the global economy. Against this backdrop, we highlight a few country ETFs that are on high alert now.

China – VanEck Vectors ChinaAMC CSI 300 ETF PEK – Down 11% in the Past Month (as of Feb 12, 2020)

No wonder, China will be the worst-hit. Much of China’s economy is under lockdown now. Per an article published on Forbes, estimates for China’s first-quarter GDP now range from 0% to around 5.5%. Evercore ISI Chairman Ed Hyman sees no economic growth in China in the first quarter due to the spread of coronavirus. China recorded 6.1% growth in 2019.

The article also mentioned that China’s yearly GDP growth amid the SARS outbreak in 2003 was hurt by 2% and was estimated to have dragged the global economy down around 0.3%, according to Time.

Australia – iShares MSCI Australia ETF EWA – Up 0.4% Past Month

Australia is the key trading partner of China. Australian exports considerable amount of materials (from iron ore to LNG), foods (from lobster to lamb), and bionic ear technology to China. Australia supplies about 40% of China’s LNG need, while about 40% of Australia’s LNG is sent to China.The price of Australia’s key export to China, iron ore, dropped 11% in January due to the virus outbreak, indicated ratings agency Moody’s.

The Australian government has enacted (on Feb 1) and extended its travel ban on people who have travelled through China. Economists at UBS predict Australia’s economy will shrink by 0.1% this quarter, while worse could be in the cards.

Notably, EWA added just 0.4% in the past month against 2.8% gains in the S&P 500 index, explaining its huge dependency on China.

Singapore – iShares MSCI Singapore Capped ETF EWS – Down 3.8% Past Month

Singapore is said to have reported the highest number of confirmed cases outside China. This will surely impact the trade-dependent economy. The country will announce a “strong” economic package next week in order to alleviate the adverse economic effect of coronavirus. The country has forecast as much as a 30% slump in tourist arrivals this year, and the resultant decline in spending.

Japan – iShares MSCI Japan ETF EWJ – Down 0.8% Past Month

China is Japan’s second-biggest export destination. Not only carmakers, retailers are also eyeing China’s economy for expansion. The Chinese accounted for about 30% of all tourists visiting Japan and about 40% of the total outlays by foreign tourists last year, per an industry survey. According to a major Japan research house, Japan's GDP growth could slip 0.2% if the virus stays for a quarter, or by 0.9% if the it continues for a year.

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iShares MSCI Japan ETF (EWJ): ETF Research Reports
iShares MSCI Australia ETF (EWA): ETF Research Reports
iShares MSCI Singapore ETF (EWS): ETF Research Reports
VanEck Vectors ChinaAMC CSI 300 ETF (PEK): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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