According to the official numbers from Chinese Authorities, the rate at which coronavirus has been spreading in China is falling, observes Danske Bank. For the last two days, the number of confirmed cases has increased by less than 20%. This compares to a daily rate of increase of over 140% earlier in January.
This suggests that each person who gets infected is spreading the virus to less people, implying that the Chinese government’s containment measures are working. Should the rate of spread continue to decrease at its current rate, Danske Bank forecasts, the number of total confirmed cases could level off at somewhere between 25000 and 35000 total cases.
But many are sceptical of Danske Bank’s optimistic take. Many do not trust official Chinese figures; many think the true number of infected in Wuhan alone could be as high as 75k. Moreover, some have argued that rather than the spread of the infection itself slowing, it is actually the rate at which infections are being diagnosed. China faces such a shortage of coronavirus test kits that getting one is like “winning the lottery” people in Wuhan are reportedly saying.
However, the international infection numbers are telling a similar story. The daily percentage increase in the number of people being infected outside of China was as high as 80% two weeks ago, but was only 1% yesterday. Internationally, there is less of an incentive for governments to manipulate the data and there are unlikely to be shortages of coronavirus test kits just yet. Even if China is not telling the truth, at least we can say for sure that international containment measures are working well (for now).
Should Danske Bank be right, and this could be the start of the end of the coronavirus crisis, this could soon be highly bullish for market risk appetite. I would expect global stocks to rally hard, crude markets to shoot higher and AUD, NZD, CAD and EMFX to sour. Havens JPY, CHF and gold would all likely be crushed.
The extent of the rebound in risk would then largely depend on the economic damage the outbreak caused to the Chinese economy. Should the damage be not as bad as feared, we could be faced with an even more bullish scenario.