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Coronavirus Spreads Its Wings Across Markets

What's happening? The coronavirus outbreak in China could slash billions of dollars off the country's economy as well as the economies of neighbouring nations. In 2003, the SARS epidemic resulted in economic losses of between $40bn and $50bn as travel and consumer spending fell, while Africa's Ebola virus led to losses of $2.2bn between 2014 and 2016. With the city of Wuhan on lockdown, China's Civil Aviation Administration has called on airlines to refund tickets to and from the city. Meanwhile, Hong Kong has confirmed two cases of coronavirus.

Why does this matter? The losses to businesses through the disruption caused by coronavirus could become a global problem as the virus spreads, with particular ramifications for insurers. Claimants might include airlines such as Delta, which has offered to change Wuhan passengers' travel options; Disney, which has had to temporarily shut its Shanghai resort; and would-be vendors at Chinese New Year celebrations, many of which have already been cancelled.

In China, there have already been disruptions to tourism and business activity as areas have been put on lockdown – an impact exacerbated by the timing of Chinese New Year, a time of year when Chinese people take over three billion journeys (the world's biggest mass migration), spending $148.96bn in 2019.

Mass migration increases the risk of coronavirus being spread further, while the likely stoppage of some of that travel puts business revenues at risk. It's easier to enforce isolation in China than in more democratic countries, which could limit the spread of coronavirus, though at this stage many people will already have made their journeys.

The unpredictable nature of contagious diseases makes it difficult to predict to what extent this impact could be replicated globally. Coronavirus is a particularly challenging disease, since there is no vaccine available, the condition is easily confused with influenza and its symptoms do not generally appear until several days after a person has become infectious. With the disease already in the US, the UK and a number of Asian countries, it is already on its way to becoming a pandemic – a simulation three months ago predicted such a scenario would kill 65m people within 18 months.

Naturally, there are also a few winners from the situation – for instance, producers of medical gloves in Malaysia, who are increasing production output in response to the crisis. Delivery services such as FedEx might also see a boost if people who are unable to travel to relatives for New Year celebrations choose to courier gifts instead. Equally, streaming services and advertisers could win more eyeballs if large numbers of people are obliged to stay indoors.

A further thought from Curation – The WHO has chosen not to declare coronavirus a public health emergency so far, and some of China's eagerness to inform the rest of the world about events could be an attempt to distance itself from its response to the SARS outbreaks of 2002, when the country kept the situation under wraps. An unintended consequence of the media storm of coverage of this outbreak could be that fear of the virus turns out to have a more profound impact than the disease itself.

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Nick Finegold is Founder & CEO of Curation Corp, an emerging and peripheral risks monitoring service.

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