(Jan 30): The economic impact of the Wuhan virus is catastrophic. Irrespective of a speedy resolution and development of an effective vaccine, the long-term impacts of the extraordinary quarantine measures will be felt for months to come. The most obvious impact is on Chinese domestic businesses. The next most obvious impact is on Chinese international businesses. The third impact is on the Chinese demand for global goods and this will impact on logistics, supply chains and production.

Assessing these impacts on portfolios is more than just direct China exposure through ETFs and MSCI Index linked holdings. It’s a reassessment of the viability of companies doing business in and with China.

Let’s start with domestic business in China. As an investment these are reached through listings in Shanghai and Shenzhen. The food and entertainment industry are the first major domestic casualty. This is more than the initial damage created by the cancellation of dinners and entertainment associated with the Spring Festival period. This in itself is a massive economic hit but the continuing impact of restrictions on public events will ensure the damage continues. Of course, this flows down the supply chain with reduced demand for everything from fresh noodles and vegetables to the entertainment support industry.

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