COVID-19 And Other Crisis

Having been in Asia since 1995, crisis is something you get used to, financial and otherwise.

History does have a habit of repeating itself, and therefore we can sometimes find solace and wisdom from the past.  With this latest virus scare, I thought I best dust off the history books for a reminder of what happened and to provide some level of sensibility.

2003 SARS (Severe Acute Respiratory Syndrome)

There are many similarities between SARS and COVID-19, including a direct genetic tie.  SARS was first discovered in October 2002 but didn’t create much impact until around February 2003 when the outbreak crossed into Hong Kong and Singapore (where I lived then and now).

With no recent past experience on this type of contagious epidemic, no one really knew what to do so fear and uncertainty took its toll.  Restaurants were empty, no one travelled, loads of mask-wearing people bravely wondered about (sounds a bit familiar).

SARS officially reported 8,437 cases with 813 deaths before it was announced as under control by the WHO in July 2003.  It inflicted lots of financial damage, including massive property price reductions in Hong Kong.  No borders were closed, but we had temperature readers at every airport, which have remained there even to today.

It took a little while for things to return to normal, but indeed they did.  Hong Kong property prices surged and are now amongst the highest in the world. 

At SMATS we had a surge of new business as many expats and migrants started acquiring property back in Australia in case of relocation.

2007 Global Financial Crisis

Little in modern history rivals the Global Financial Crisis (GFC) which ripped through stock markets and claimed many corporate scalps over a 24 month period from about October 2007 to March 2009.  This was not an illness, or disease of a physical nature, but caused more human harm than could be imagined, especially in the USA where thousands lost their jobs and homes.

It was largely self-inflicted with the main catalyst being greed and fraudulent loan books, where bad loans and high-risk clients were blended with a few good loans and passed on as "safe financial instruments"  for ridiculous profits. History is still blurry on exactly what happened with few, if any, ever brought to justice for causing a major meltdown of financial and stock markets.

Governments around the world went deep into debt to stimulate and support markets, most of the funds still remain outstanding today.   The result was a global pat on the back for "saving" the system and since then we have enjoyed tremendous growth in most markets and economies, with most losses of the GFC recovered with in 3 to 5 years.

2009 Swine Flu

Swine Flu was first detected in America in April 2009 and was a strong new strain of influenza. It was officially called a Pandemic in June 2009.

According to the CDC in the US, for the year to April 2010, there were an estimated 60 million cases, almost 300,000 of those requiring hospitalization and unfortunately over 12,000 deaths, in the United States.

A vaccine was made available from October 2009 and the WHO declared an end to the pandemic in August 2010.

Globally, estimates range from 10-20% of the global population were infected, and a broad estimate of 150,000 to 575,000 deaths with a mortality rate of approximately 1%.

Despite the significant amount of infectants of Swine Flu, we did not see the same level of Governmental action or economic impact as currently experienced with COVID-19. Perhaps the health impact of Swine Flu best explains the extreme measures being taken to prevent the quick transmission of COVID-19.

2012 MERS (Middle East Respiratory Syndrome)

Another relative of SARS emerged in 2012 in Saudi Arabia. More than 1,500 cases resulting in approximately 500 deaths occurred in the first 2 years, with this number rising to a total of 2,506 cases and 862 deaths to January 2020 according to the WHO.

In recent times there have been limited new cases and the virus is still “active”, yet it didn’t get the same level of exposure and concern publicly as SARS or indeed the current COVID-19 outbreaks.

Its main areas of effect where Saudi Arabia the Republic of Korea (2015) where tourism slumped and a resultant reduction in economic activity was experienced.  Similar to SARS and the GFC, things have stabilised and recovered within the year of the worst, even though this virus remains active at low levels.

What does it mean?

We aren’t immune to crisis, they come in all shapes and sizes. From the current threat of virus to natural issues like bushfires, earthquakes and tsunami’s we can’t ever expect to live in a crisis-free world.

What is strange to observe is how we have become immune emotionally to some things and not to others.  Every year over 1 million people die from traffic accidents worldwide, yet there is no fear, panic or demand to ban driving and remove cars from our lives. 

The WHO has estimated the annual global deaths from influenza range from 250,000 to 500,000, yet for some reason we have accepted this as “normal” and don’t seem to allow this startling fact to adversely affect our lives or economies.

The recent reaction to COVID-19 shows how irrational we can be with people in Australia not going to Chinese Restaurants because they may somehow be connected to a virus from China, and stockpiling and fighting over toilet paper as if that may be more important than anything else in the event of a pandemic outbreak.  How does this thinking even manifest itself in anyone’s mind?

There is no doubt the level of media attention and style of reporting has a significant impact, but which came first, the chicken or the egg? 

I am in no way trying to underplay the importance of early action or prudent medical and containment practices as this virus has a potentially fatal outcome, especially for the elderly.  But at this stage, the Covid-19 has a substantially lower mortality rate than most its predecessors even though it has had a much greater potential spread.

The impact of these irrational actions are going to have massive financial implications as borders get shut down, travel cancelled and supply chains disrupted. Governments are under massive public scrutiny to “stop the spread” which in reality is an almost impossible task.  Billions of dollars will be spent and lost in dealing with the potential of the issue and I am concerned it won't necessarily be the most effective or efficient way to deal with these issues.

I have no doubt that we will be moving on from this, either through physical containment or mental acceptance, in the not too distant future. Hopefully, this can be achieved in a similar timeline to SARS of 4 months rather than the ongoing low level of activity of MERS.

When we do start to want to move back to our “normal lives”, then so too will the global economy start to quickly heal itself, at least until the next crisis!

In the meantime, there will be opportunity that should be considered and perhaps acted upon.  In all things seek safety, value and reality. Some companies will be affected harshly from these issues, such as travel-related industries, others will benefit greatly, such as medical services.

Be careful to make sure that whatever opportunity you seek that it has the capacity to survive between the start and end of the crisis, which will have different timelines depending on the activity. 

The Australian property market showed great resilience through SARS and the GFC largely as it was a safe haven for a long term living destination for expats and potential migrants. This may well be the case this time around as well, but it remains important to focus on genuine living accommodation that would appeal to this potential buyer pool if you intend to acquire. That will enhance your level of safety and potential for return.

We are confident our economy and any declines in the property markets will bounce back with strength in time. Reacting to short-term economic fluctuations can sometimes work against long-term goals. However, we recognise every client’s individual circumstances are different and whilst some may be in a position to take advantage of opportunities, others may be adversely impacted. SMATS have the experience and knowledge to provide assistance in all scenarios through our tax, finance, financial planning, migration and property teams. We are here to help, simply email smats@smats.net.