Irene Hartmann
02/28/2020 - 14:18
- Clarín.com
- Society
How do a lot of guys relate to obvious anguish by looking at indecipherable columns of numbers on dozens of screens that represent something called “stock market shares” and a devilish virosis, the coronavirus, which is advancing steadily across much of the planet ? Titles such as “Markets fall in Brazil with 132 suspicious cases” or “Las Bolsas sank for fear of the expansion of the coronavirus in the United States” suggest a close link between two apparently unconnected sectors. Here, an elementary explanation of this matter, also in elementary jargon .
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To understand the first key concept (what is the Stock Exchange!) Some faith is required. Because stock markets are deployed, not in gondolas with concrete and palpable products, but in expectations of what will happen . It seems Chinese, but it is not: the "bag" is a non-existent, virtual space, created for speculation. The currency is the trust . And so the participants of the game are depositing or withdrawing their faith in this or that company.
As explained by Clarín Gabriel Zelpo, economist at the consulting firm Seido, "every action one takes in the present is based on the expectation he has about the future."
The paranoia for the massive infections of coronavirus, in the look of a passenger in the international airport of Mexico (AFP).
An eloquent image? “If there is sun, one presumes that it is better to go out without an umbrella. If there is a rain forecast, take it. But if you do not carry it and a storm runs out, surely one is willing to pay a higher price for the umbrella, compared to having bought it without hurry, as to use it at any time of the year. ”
In other words, a change in future expectations (" I think I'm going to get wet and I don't want to ") could generate a change in consumption and also in prices. Anyone who, in an inflationary context like the current one, chooses to stock nonperishable food every time he has a handle in his pocket ...
What do umbrellas, rain and stock actions have to do with? Investors buy shares of companies, the closest thing to owning a piece of that entity, trusting that economic growth will make these "bits" more valuable, which will result in some future profitability .
At this point you may have to clear a couple of concepts: stocks and bonds are not the same . Some investors also become bondholders of a certain country, but in that case they would not become "owners" of a "bit" (or metaphorically yes?) But instead took over a piece of public debt . But better leave that talk for another walk. Let's go back to the coronavirus.
An operator of the New York Stock Exchange (EFE).
There are many factors capable of generating instability or, at least, doubts in the owners of "little actions", which can derive in what experts like to call shocks .
In Zelpo's words, "the coronavirus is that element that is generating a shock now, because it is offering uncertainty . Everyone wants to be certain of what is happening because that gives confidence in what is going to come. Nobody likes uncertainty and then you choose to go for sure . "
What is safe here and in the rest of the globe? Buy dollars. That is, instead of going on vacation, buy a car, eat out, collect dollars.
With the holders of shares it is the same: "As the price of the shares you have (due to uncertainty) begins to fall, you sell them and buy dollars, applying precautionary behavior ."
Controls of the Ministry of Health at Ezeiza Airport (Luciano Thieberger).
The domino effect is seen right away: it is presumed that in a country with massive coronavirus infections, production processes can be impaired. That is, because of the epidemic, not all employees can go to work, that this lowers productivity or generates missing ... that there is less consumption, which will result in less employment and eventually less revenue. It is a huge snowball based on speculation , which can end in "a deterioration in fiscal accounts," Zelpo summarized. In other words, he said, "the economy cools."
Of course, not all items fall. The companies that produce “ hygiene ” (chinstraps, gel alcohol and so on and so on) live a pompous revival at this time, just like medicine laboratories .
In Latin America, although the coronavirus epidemic did not arrive, “the bags see the future and evaluate that the sky clouded over. They don't know if it's going to rain; They have uncertainty. ” In other words, they get rid, just in case, of the actions under their belt, and go out to buy "umbrella dollars . "
In China, chefs prepare lunch for factory workers, wearing clothing to protect themselves from coronaviruses (AFP).
Finally, it is key to say that the coronavirus epidemic could have started in a second-line country, of those that never appear on the international scene, but It was just in China .
“50% of global imports and exports (what countries buy and what they sell) leave China. China is the factory of the world . In reality they are large importers: they do not generate much added value in the products they import, but they apply some productive process. Although what they export does not have so much added value, the weight is in the quantity, in the figures of their exports ”, explained Zelpo, and clarified:“ That is why a good part of the planet is connected with them and that is why this epidemic generates stock market impact "
Thus, “if there is an epidemic, it consumes less. If demand falls, the prices of things fall immediately. And there is also the risk that due to the adoption of security measures to avoid contagion, the productive processes fail considerably. The whole economy slows down. ”
LGP