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What the coronavirus means for your investments

28 February 2020

As you may have seen or read recently, the ongoing concerns around the impact of the coronavirus – both social and economic – have led to a sharp decline in global equity markets.

This may have resulted in a decline in your KiwiSaver or investments account balance, and given this, we wanted to give you an update on the situation with some background information on the virus, the financial reaction and how we can assist you.

Information on the coronavirus

The coronavirus was first reported in the city of Wuhan, China in late-December, 2019 and as of 26 February 2020, it has resulted in more than 2,700 deaths with more than 80,000 cases reported. Initially, the virus was contained in mainland China, but now cases have been reported in at least 40 other countries.

In response, a number of countries, including New Zealand, have imposed travel restrictions for people in and out of China and set up quarantine centres.

As of 26 February, the World Health Organization said it’s too early to label the outbreak a pandemic, but said it’s in a “phase of preparedness for a potential pandemic.”

Financial reactions

There have been sharp declines in global equity markets as the coronavirus has limited the movement of goods and people, which is likely to weigh on global growth. China is the world’s second-largest economy and the largest exporter of goods, totalling more than US$2 trillion per year.

In New Zealand, the NZX 50 has fallen more than 5% from its recent record high as fears the slowdown in trade with China – a significant trading partner of New Zealand – will hinder growth. Furthermore, the travel restrictions to and from China is likely to lower tourism numbers.

In the US, the S&P 500 recorded its biggest one-day percentage drop in more than two years on 24 February.

Despite the recent decline, as of 25 February, the NZX 50 is still up year-to-date, this coming off a 30% gain in 2019.  

Meanwhile, the increase in volatility has seen demand for government bonds, which are deemed less risky.

What does it mean for your investments?

It is important to remember that KiwiSaver and investment funds are long-term savings vehicles. Volatility is all part of investing and doesn’t have to be a cause for panic and can often serve as good buying opportunities, for active investment managers, such as the team at ANZ Investments.

Given this, now might be a good time to check our Risk Profile Tool, which will help you determine the risk profile that best fits your situation.

If you’re still unsure and would like some help, we recommend you speak to a financial adviser. If you don’t have one, you can give our team a call on 0800 269 238 – they can give you advice tailored to your personal situation.

 

This article has been prepared by ANZ New Zealand Investments Limited for information purposes only and it should not be treated as financial advice. It is recommended that you seek advice from an authorised financial adviser which takes into account your individual circumstances before you acquire a financial product. Past performance does not indicate future performance. Performance is not guaranteed and may be negative as well as positive.