Please note that starting this week, Tong Kooi Ong has temporarily ceased writing this column or make any contribution. This function is now taken over by Asia Analytica.

SINGAPORE (Mar 20): The sharp escalation of the Covid-19 outbreak continues to dominate headlines, raising anxiety and buffeting consumer and investor confidence the world over. The sell-off has been fast and furious. There is indiscriminate selling across the board, regardless of quality, likely perpetuated by algorithm trading and exchange-traded funds. Without better information of how long the outbreak will last, it is impossible to determine the economic fallout and, therefore, prescribe rational valuations to stocks.

The Volatility Index, often called the “fear” gauge on Wall Street, surged sharply higher, beyond even the peak during the global financial crisis (GFC) (see Chart 1). The heightened uncertainties and anxiety are also reflected in the huge daily point swings for the Dow Jones Industrial Average, the most closely watched bellwether index in the financial world (see Chart 2). Even Treasury bonds and gold — traditional safe haven assets — have come under heavy selling pressure in recent days (see Chart 3).

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