Ask NAB economist Alan Oster about the impact of the coronavirus and he responds: “I don’t know, but it’s not a positive”.
That is perfectly put, because right now the truth is no-one really knows.
Later this week the market is expecting the RBA to downgrade its estimate for Australian growth from its present 2.5 per cent.
Whether it drops to a market view of 1.5 per cent is doubtful, but the fact is the uncertainty of the bushfires and the virus are clearly hits on economic growth.
Their impact is compounded by the economy was already weak, with consumer confidence down and a still cautious business sector, leaving government the only positive on the economy right now.
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Service sector exports to China total $18 billion with tourism alone some $6 billion on RBS figures.
With shutters being erected against Chinese victors including students the impact is clearly meaningful.
Just how long it lasts is anyone’s guess.
The Chinese Government is moving quickly to minimise the impact of the virus and this will also hurt Australian companies.
Food and wine exports will be most obviously hit if the lockdown goes any distance.
Bellamy’s shareholders can count themselves lucky Mengniu completed its $1.5 billion takeover late last year before the scare hit.
Right now the market is dealing with known unknowns and hopefully this will clear quickly but uncertainty is no friend of a stock market trading at near peak levels.
Local bourse enjoys best January trading in two years
Australia’s sharemarket has broken records this week all while its US counterpart takes a deep breath to recover from the shock of China’s AI capability.
Companies surfing on the crest but waves eventually dump
Companies are generally riding high on the sharemarket’s returns, which is why corporate Australia needs to show some earnings growth in the reporting season or see stock prices hammered.