Home / Readers Forum / Coronavirus and its effect on the stock market

Coronavirus and its effect on the stock market

Hi everyone, so who here does any kind of investing or trading on the stock market? Today I’ll be talking to you about the coronavirus and its effect on the stock market price of specific companies.

As a result of this outbreak, many companies suffered in terms of a drop-in stock price. Obviously, companies who were most affected were the Chinese companies these included YUMC, LK and Alibaba. I remember two weeks ago watching YUMC drop around 3 to 4 dollars and LK roughly the same. These companies had to close factory’s, shops, and lost employees as a result of the outbreak. This causes what we call ‘fear’ and so what happens is shareholders lose confidence in the stock because if factory’s are closing and so on, this will affect future earing reports negatively and so they sell there shares and at the same time traders see this as an opportunity to short the stock which is essentially betting that the company will go down and then cover your position, and so as result the stock price drops.

Now it wasn’t just Chinese companies that were affected, many American companies also felt the impact of the virus such as McDonalds and Starbucks having to close down operations in certain places in china, also American airlines & delta had a drop in stock price, however the other side of the coin for this was that people saw it as an opportunity to buy the dip, because some people will see this as for e.g. the Ebola virus where it came and then it went, fairly quick fair to say. So, when market open at 9:30 happened it went from -4% or -5% I think but shot back up to +1%.

Believe it or not the virus actually had a positive effect on the stock price of certain companies. In particular, the pharmaceuticals companies, any pharma company that announced they were looking into a cure, shot up in value. for example, nvax climbed 20%, ino 25%, and I remember seeing one in particular that shot up 154%. This is what we call ‘hype’ and its usually short lived, the stock price usually drops within 24 hours to 72 hours.

I should also make it clear that how this news story relates to this class, management, is that how you the investor/trader should manage your capital when it comes to investing/trading during a black swan event like the coronavirus.

About smax

Check Also

Amazon Staten Island Workers Withdraw Request for Union Vote

Last week, there was a presentation on the strike of Amazon employees in Germany, and ...