Dubai: Despite measures by central banks and governments across the globe to counter the economic toll of the coronavirus, analysts say they expect the panic to continue in equity markets, albeit at lower volatility.
In the US, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all closed lower on Friday, falling by around 4 per cent each as investors remain concerned about the coronavirus outbreak. So far, more and more governments have places cities on lockdown or asked their residents to stay home, all of which has taken a deep toll on economic activity.
Craig Erlam, senior market analyst at OANDA Europe, said in a note that until the increase in number of new coronavirus cases starts to lose momentum, investors will continue to lose interest in stocks.
“With the number of cases still accelerating around the globe, and countries increasingly moving towards lockdown, I don’t see this as being the bottom, unfortunately,” he said. “It’s far too early to call the bottom in the markets.”
This is more so the case in Europe and America, which are yet to see the peak of the virus outbreak, analysts say. In China, in comparison, economic activity is starting to return back to normal. This, coupled with liquidity injections and fiscal measures from central banks and governments, has helped reduce volatility in international markets.
However, “a short decline in volatility doesn’t necessarily mean that the panic is over,” warned Ipek Ozkardeskaya, senior analyst at Swissquote Bank, who said investors need to wait for a further decline in volatility and for price stabilisation before crying victory.
Other analysts said that while conservative investors may want to hold their horses before buying stocks, those with higher risk appetites can use the plunge in share prices to buy some stocks that have solid fundamentals.