Corona sets a foreign fund sell-off at CSE

The coronavirus, now widely considered as the prime threat to financial markets is instigating a black swan event for Colombo’s shares, with many foreigners exiting in a major sell-off as global investors are jumpy over the uncertainty, analysts say.

According to the latest statistics, 12 Asian stock market saw a fall since January 17 which include Australia, Japan, India, Malaysia, Singapore, Taiwan, Indonesia, Philippines, Korea, Thailand, Hong Kong, and of course China. This fallout has affected the Colombo stock market which was hit by the tensions in West Asia last month with stocks closing lower in early January.

As the ‘ Year of the Rat’ dawns, coronavirus will weaken China’s position in global trade, analysts say. The outcome could create a major shock for markets with geopolitics and global trade slackening but the contagion is a regional rather than a global one. Analysts say that as a result the Colombo Stock Exchange (CSE) will see more foreign outflows. As at Thursday from January, it was Rs. 3.3 billion. "This is beyond what is normally expected of a situation and has potentially severe consequences," an analyst told the Business Times. External shocks can spoil economic trends and rapidly change market sentiment, he said noting that next week will see a similar trend by foreigners.

But not all funds are disturbed. JP Morgan, an American multinational investment bank and financial services holding company headquartered in New York City, downplayed the virus impact on global markets' to its clients saying that it's alarming but their effect on global markets tends to be fleeting.( DEC)