Further Economic Shock Looms Large amid Grim Global Outlook Improved situations of the coronavirus

Improved situations of the coronavirus outbreak have seen Chinas imports and exports slowly picking up as the country resumes production and business. Yet as the virus quickly evolve into a global pandemic, posting significant threats on the global economy, investors need to beware of the risks of a one-two punch.

China‘s import and export growth rates have both declined year-on-year during January to February, with exports falling beyond estimation to the lowest since last February. Statistics released by China General Administration of Customs suggest that exports in dollar terms fell by 17.2% year-on-year during January and February, while imports dropped 4%, higher than the estimated median of a 15% decline. January-to-February trade deficit reached US$7.09 billion, reversing Reuters’ previous estimation of a US$2.46 billion surplus.

The evolving pandemic has led to great fluctuations in the price of major assets. Yielding rate of 10-year US Treasury Bond plunged below 1% for the first time in history; later the Federal Reserve announced the first emergency rate cut after the financial crisis, lowering rate by half a percentage point to cushion the rising economic threats brought by the coronavirus outbreak. Meanwhile, the Reserve Bank of Australia had also slashed rate by 25bp to a record-low of 0.50%

Report from Goldman Sachs points out that G10 members and emerging market economies will likely follow suit and cut rates. The Fed‘s 50bp emergency rate cut reflects a gloomy estimation on the impact of the coronavirus outbreak, and further evolution of the pandemic will further impose uncertainties on both the global supply chain and economic recovery of many countries. It’s estimated that POBC will have sufficient policy room to cut interest rate in March.