Haynesville Consulting
Coronavirus Outbreak
Haynesville Consulting is carefully monitoring the current Coronavirus development, and is sharing its updated thoughts to the University of Leeds, U.K..
The global Financial Market is currently driven by sentiment as the initial knee-jerk reaction to the public health crisis. While the crisis is developed, this sentiment will be closely correlated to two reported numbers:
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Confirmed new infection cases
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Cumulative death rates
In an example of SARS in 2003, sentiment would get better when the above two numbers stop getting worse.​
Impact of Fundamentals
The direct damage on consumption will be sharp. Coronavirus is less deadly than SARS, but it is more contagious. As of 25 March 2020, 462, 000+ Coronavirus cases have been reported in 190+ countries, while 8,000 people from 29 countries were infected by SARS. In addition, consumption is now much more significant to the global economy than in 2003. Household consumption is about 60% of GDP making it the largest component of GDP besides investment, government spending and net exports.
Global Recovery: Energy is the Key
We estimate the global energy demand will decline by 23% in Q1 2020. The event that industrial activity is severely delayed, as well as seasonal reduction in power consumption, pressures energy market to the historical lows.
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Although the global economy provided a sharp rebound in the post-SARS period, we believe SARS is a limited analogue, and the recovery of the energy market is crucial because of the following reasons:
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Coronavirus is more contagious than SARS although each government is conducting more definitive process to stop spreading;
Global economy and energy demand are growing much slower than they were in 2003; and
Energy market has now become the first industry in most developing countries, in addition to a global growing demand of refined products and renewable resources.
