Fears of a rapid global spread of the coronavirus are rekindling the specter of a stock market crash. "Since Monday, the CAC 40 has lost almost 12%, it is reaching its level of August 2019, that is to say that we erase the gains made from this date," said Vincent Boy, market analyst at IG France. This is not a big drop in itself, but it may well be only the first response to an earthquake of a completely different magnitude. This is feared by several analysts joined on the eve of a weekend that promises to be “crucial”. With the fear, then, of a "dark" week.
Fear of complete blockage
"The discovery of a source of contamination last weekend in Italy surprised the stock markets, they realized that the epidemic could spread much faster and with a much greater impact on the world economy", confides Vincent Boy. There are cases of contamination in Belarus, in sub-Saharan Africa, in California ... "It is the succession of households in the world that makes the world stock markets fear the worst". The worst? It fits in one word: recession. "The fact that companies are starting to communicate on the effects of the coronavirus on their activities and their results reinforces fears of a slowdown or even an economic blockage, even temporary, in certain countries," added the analyst.
The next few hours will be decisive. All eyes are already turning to the United States, the world's leading economy where large household consumption drives the economy and drives global growth and, indirectly, that of Europe. "8,400 people could be tested soon in California, where an outbreak of contamination is suspected," worries Vincent Boy. If such an outbreak is confirmed or if the epidemic worsens, we should expect stock market repercussions as soon as the markets open on Monday. With the risk that they will spread like wildfire to all of the world markets.
"You have to keep your cool"
Does this mean that the small holder must sell and take his profits as long as he can? No, of course. "You have to keep your cool and keep a long-term perspective, over three to five years," said Frédéric Rollin, strategist at Pictet Asset Management. And it all depends on the sector invested. "Even if luxury values are being roughed up, their high level of margins keeps them strong," said one analyst. This is not the case for the air, automobile and hotel sectors, which are much more exposed.
The title of Air France lost 25% in one week, easyJet fell by 27%, against almost 20% for ADP and 17% for the Renault group. "The current decline shows that some investors have capitulated, preferring to sell but others will take the opportunity to make purchases on the cheap, which should balance the market," notes the strategist who expects rather an economic slowdown for one or two quarters. "It is normal for the stock market to adjust but that does not affect the ability of groups to pay dividends this year," he said.
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This period of turbulence promises to be even more dangerous for French companies. "SMEs will be the first to suffer from a slowdown in consumption," says another professional. Among the large groups, those most indebted may find it difficult to refinance and could quickly become easy prey ”, already anticipating“ more or less forced rapprochements between European players and hostile takeovers ”in the most affected sectors like distribution, banking and transportation.
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VIDEO. Coronavirus: "A case of force majeure for companies", announces Bruno Le Maire
