Should you be worried about Coronavirus?

  • 30 January 2020
  • 10 minutes
  • Stock prices have fallen since news emerged of the Coronavirus outbreak in China

  • Coronavirus is the latest in a series of rapidly spreading illnesses that have medical and economic implications

  • When put into context, from what evidence is available at present, we do not envisage any major long-term economic implications from the coronavirus outbreak. .

The human factor

To date, there have been 170 confirmed deaths as a result of the coronavirus outbreak and 7,700 cases of the disease worldwide. The majority of these centre on the large Chinese city, Wuhan, but cases have been recorded in Europe, North America and Australia.

There is no doubt that this represents a human tragedy.

However, there is also the secondary consideration of how such an event affects the wider economy, and that is what we as investors monitor.

It began in Wuhan

The city of Wuhan is a transport hub, so the potential for the virus to spread was high. The outbreak coincided with the Lunar New Year which is traditionally the time when Chinese families gather over a public holiday. In other words, millions of Chinese people travel, providing ample opportunity for the virus to spread.

That led to a high enough level of concern for the Chinese authorities to cut off transport to and from the city while they tried to isolate and address the problem.

In the meantime, sufficient numbers of people had already travelled, leading to cases emerging internationally, as I’ve noted above.

Immediate economic implications

The threat of catching a form of pneumonia is frightening enough to affect behaviour. People become less inclined to buy goods from the affected areas, less likely to travel, and more inclined to buy masks and vaccines.

China has already started feeling the consequences of this reaction. Travel-related industries appear to have suffered and confidence in the short-term outlook of the Chinese economy has dropped.

The latter point has been reflected in falling mineral prices: China is the dominant global buyer of oil, copper, nickel, aluminium and coal. Their prices on open commodities markets have fallen sharply with oil having dropped from around $65 to less than $60 between Monday 20th January and Monday 27th by way of example.

The fall in confidence has been reflected in the country’s benchmark stock index, the CSI 300, dropping by 4.3% over the same period. This was in contrast to prevailing signs that the global economy was picking up and stocks appeared to constitute a potentially attractive opportunity.

The concerns have taken their toll beyond China. America’s benchmark stock index, the S&P 500, fell from 3330 points on Friday 24 January, to 3243 by the close of trading on Monday 27 January. That’s a 2.6% drop over two working days.

Historical comparison

Coronavirus is the latest in a series of contagious ailments. Obvious comparisons are being made between it and the two relatively recent viral outbreaks that emanated from China: SARS and H7N9.

Severe Acute Respiratory Syndromes (SARS) took hold in 2003 and was followed a decade later by Influenza A Virus Subtype H7N9. According to a Chinese research paper[1], “the social and economic effects of H7N9 were not as serious as in the case of SARS because the response to H7N9 was more effective”.

The research paper notes that there were more than 8,000 individuals infected with SARS between 1st November 2002 and 31st July 2003, with over 700 deaths, most of which occurred in China. By contrast, between February 2013 and November 2015, H7N9 accounted for 275 deaths from the 681 confirmed cases.

In economic terms, the global economic cost of SARS was estimated to have been between “$30 billion and $100 billion” while the effect on China was the loss of “an estimated 1% in gross domestic product” [1] which equates to around $93 billion. H7N9 had little international economic effect but did knock around $5.8 billion off the Chinese economy [1].

Putting it into context

While the rate of Coronavirus infections and deaths is relatively rapid, the reaction by the Chinese authorities has been relatively swift and drastic. What’s more, they have the experience of having dealt with similar events before.

There will be economic implications as well as the awful tragedies that so many families face. But there is a further comparison that might be worth considering: Norovirus.

Norovirus is the most common cause of acute gastroenteritis across the world. According to a 2016 World Economic Forum report [2], “In the US alone, it causes 20 million illnesses, contributes to between 56,000 and 71,000 hospitalisations and 570 to 800 deaths annually. Globally, norovirus causes over 200,000 deaths annually. It is estimated to cost approximately $4.2 billion in healthcare costs and over $60 billion in societal costs globally each year”.

The key point here is that it’s an ongoing problem. SARS and H7N9 were both extreme events that lasted for less than a year. Norovirus has dogged us in what could be considered to be a more persistent manner.

So why aren’t we talking about Norovirus?

When an outbreak occurred on a cruise ship a year ago, it made the news. The outbreak affected 200 people. Thankfully, no one died.

If you visit the Centers for Disease Control and Prevention website [3], you can browse through the catalogue of cruise ship outbreaks of Norovirus dating back to 1994. Much like malaria (around 400,000 deaths a year) or diabetes (more than a million a year) [4], the lack of sensationalism relating to this virus prevents it from making the news.


In short, the evidence that is currently available suggests that the Coronavirus appears likely to be a relatively short-term outbreak. Its economic effect will be felt but nowhere near as much as the personal tragedy that descends upon its victims and their families.

[1] The impacts on health, society and economy of SARS and H7N9 outbreaks in China: A case comparison study”, edited by Pam R. Factor-Litvak, sourced from 28th January 2020.
[2] “What is the economic effect of Norovirus infections?”, Melvin Sanicas, World Economic Forum, June is the economic effect of Norovirus infections?”, Melvin Sanicas, World Economic Forum, June 2016.
[3] “Vessel Sanitation Program” page on the Centers for Diseases Control and Prevention website,, accessed 28th January 2020
[4] World Health Organisation website, accessed 28th January 2020

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