Update re coronavirus

Andrew Clifford,

Andrew co-founded Platinum in 1994 as the Deputy Chief Investment Officer, having worked alongside Kerr for several years at Bankers Trust and perfecting the craft of.. More

29 Jan 2020

With the coronavirus 2019-nCoV dominating news headlines and various travel and health warnings now in place, we reflect on what this may mean for markets and Platinum’s portfolios1.

The key issue is that human to human transmission can occur before symptoms are displayed.  The virus belongs to a family of RNA viruses that have a tendency to mutate and it is very likely that 2019-nCoV will mutate.  The strains that have been sequenced so far continue to be fairly identical and hence indicate that China has detected the new virus early and acted accordingly.  Global governments also appear to be more prepared, co-ordinated and responsive than in prior situations.  The key challenges to overcome will be rapid diagnosis/screening to identify infection prior to symptoms, isolation to reduce the spread, and appropriate vaccination and treatment.  We should not underestimate that this is a serious issue and cannot rule out more restrictions on the movement of people and/or goods.   Action taken by authorities, coupled with fear, will likely impact on economic activity, particularly travel and trade.  Markets respond to emotion and hence there could potentially be a greater effect on markets than the economic reality.
While some health care companies may benefit, including some we own (diagnostic and treatment related), the negative market response has focused on companies sensitive to global economic activity. Previous episodes such as SARS will likely be used as a parallel, but this 2003 event pre-dated China’s economic boom, and came at the end of the technology stock bear market.  At that time in 2003, we took the opportunity to launch the Platinum Asia Fund to highlight the region’s potential.
Currently, it is hard to estimate the likely duration, scale and impact of the coronavirus but we are in the process of reducing market exposure as markets have run hard in recent months.  Concerns about the potential market impact of the coronavirus have led to us accelerating this process in order to provide additional downside protection.  This has been implemented via index shorts and trimming recent strong performing positions in portfolios.
1 Platinum International Fund, Platinum Asia Fund, Platinum Global Fund, Platinum Capital Limited, Platinum Asia Investments Limited

DISCLAIMER: This information has been prepared by Platinum Investment Management Limited ABN 25 063 565 006 AFSL 221935, trading as Platinum Asset Management ("Platinum"). It is general information only and has not been prepared taking into account any particular investor’s investment objectives, financial situation or needs, and should not be used as the basis for making an investment decision. You should obtain professional advice prior to making any investment decision. The market commentary reflects Platinum’s views and beliefs at the time of preparation, which are subject to change without notice. No representations or warranties are made by Platinum as to their accuracy or reliability. To the extent permitted by law, no liability is accepted by Platinum or any other company in the Platinum Group®, including any of their directors, officers or employees, for any loss or damage arising as a result of any reliance on this information. 

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