When entering the site and if cookies are prevented from being saved, a message must be displayed
in a popup message box informing the user that their local browser settings are preventing
cookies from being saved and that cookies are required for the site to work. Exact text
to be provided for UAT. On OK click of the message, the user should be redirected to
the global landing page (currently ssga.com).
Coronavirus: A Human Crisis That Should Trigger Chinese Policy Put
While the full impact of the virus remains unclear, it will likely force China to maintain a degree of policy support into the second half of 2020 and possibly beyond.
The novel coronavirus (2019-nCoV) is still in the early phase of accelerating infection rates and, sadly, increasing death rates. Our thoughts are with all those affected by the virus. While much is still unknown, authorities have responded within China, across the globe and in international cooperation. Thus, we have faith that ultimately the outbreak will be contained.
As global investors, we apply a macroeconomic lens to our assessment. Although the nCoV outbreak will almost certainly knock China’s quarterly economic output, the medium- and long-term view could be much less negative.
One risk going into 2020 was the possibility that the Chinese government would reverse course and cut, if not eliminate, its stimulus programs. It is now highly unlikely that we will see a sudden stop to the monetary, fiscal and regulatory stimulus that has helped drive the Chinese recovery since mid-2019.
The importance of public health in China has materially raised the bar for the central, provincial and local governments to effectively manage the acute effects of the epidemic. While laws technically hold the local government accountable, President Xi and the central government exercise centralised power and we expect them to mobilise government resources to limit the economic fallout.
Figure 1: Chinese Fiscal and Monetary Policy Settings Have Been One Directional
Source: State Street Global Advisors Global Macro Policy, Macrobond, IMF, as of 31 January 2020.
In terms of economic impact, nCoV will likely cause Chinese economic growth to drop significantly from 6% during Q1 2020, requiring the Chinese authorities to revisit their plans for ending their stimulus actions. In 2019, fiscal easing was roughly equal to 2% of GDP, with another 0.5% slated for 2020. Along with the Chinese central bank’s monetary policy actions — lowering lending rates and reserve requirements (down 2%) for banks — this combined fiscal-monetary stimulus has helped stabilise Chinese growth and the global recovery.
The phase one US-China trade deal was going to be the trigger to cut back on stimulus, but nCoV makes that prospect unlikely. Instead, we can expect policy support continuing into the second half of 2020 and possibly beyond. Together with the cyclical recovery post epidemic, this means China could well be a growth driver over the whole year, compensating for its role as a source of slowdown in Q1 2020 (assuming the virus effect reverses within two to three months). In the long term, as Figure 1 indicates, this episode reaffirms the “policy put” that has guided Chinese actions for the past decade.
Virus-induced asset price moves are likely to correct once the growth rate of infections slows down. Thereafter, Chinese policy support should provide a tailwind for global equities as well as the renminbi, with positive knock-on effects for other emerging market currencies.
SPDR ETF is the exchange traded funds ("ETF") platform of State Street Global Advisors and is comprised of funds that have been authorised by European regulatory authorities as open-ended UCITS investment companies. SPDR ETFs may not be available or suitable for you.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.
Changes in exchange rates may have an adverse effect on the value, price or income of an investment. Further, there is no guarantee an ETF will achieve its investment objective.
SHARES IN THE FUNDS OF THE SPDR® ETF SICAV, SSGA SPDR ETFS EUROPE I AND SSGA SPDR ETFS EUROPE II PLC MAY NOT BE AVAILABLE FOR OR SUITABLE FOR YOU. THE VIEWS EXPRESSED IN THIS SITE DO NOT CONSTITUTE INVESTMENT ADVICE. INDEPENDENT ADVICE SHOULD BE SOUGHT IN CASES OF DOUBT. NEITHER THE INFORMATION NOR ANY OPINION CONTAINED ON THIS SITE CONSTITUTES A SOLICITATION OR OFFER TO BUY OR SELL SHARES OF THE FUNDS OR ANY OTHER FINANCIAL INSTRUMENT.
Standard & Poor's®, S&P® and SPDR® are registered trademarks of Standard & Poor's Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation's financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
SPDR ETFs may be offered and sold only in those jurisdictions where authorised, in compliance with applicable regulations.
Information related to Mexico
This information does not constitute and is not intended to constitute marketing or an offer of securities and accordingly should not be construed as such. The Funds referenced herein have not been, and will not be, registered under the Mexican Securities Market Law (Ley del Mercado de Valores) and may not be publicly offered or sold in the United Mexican States. Disclosure documentation related to any of the aforementioned Funds may not be distributed publicly in Mexico and shares of the Funds may not be traded in Mexico.
You should obtain and read a prospectus and KIID relating to the SPDR ETFs prior to investing. Further information and the prospectus/KIID describing the characteristics, costs and risks of SPDR ETFs are available for residents of countries where SPDR ETFs are authorised for sale on the SPDRs website and from your local SSGA office.