Nicholas Spiro

The View | Asia may have the edge in battling the coronavirus, but property prices don’t reflect the severity of the crisis

The assumption that Asia will be first in, first out of the virus-induced downturn is questionable, as it is still unclear how quickly China’s economy can resume without triggering a rise in new infections

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Masked shoppers cross the road near a deserted shopping district in Beijing on March 22. China is striving to restore activity in the world’s second-largest economy. Photo: AP

Nicholas Spiro

Published: 9:00am, 24 Mar 2020Updated: 9:13am, 24 Mar 2020

Last week, the Covid-19 outbreak infected global capital markets, and in an extremely aggressive manner. Last Monday, the CBOE Volatility Index, Wall Street’s “fear gauge”, soared to its highest level since the 2008 financial crisis. In a sign of the speed and severity of the deterioration in sentiment, the benchmark S&P 500 stock index has plunged 32 per cent since its peak on February 19, the fastest descent into a bear market on record.

More worryingly, the selling pressure is indiscriminate. A lack of liquidity in markets has forced investors to sell even the safest of assets, such as government bonds, in order to hand cash back to clients. This has sparked fears that markets are broken, fuelling further volatility as the global economy slides into what is expected to be a brutal recession.

While the world’s leading central banks and governments have fallen over themselves to flood the financial system with liquidity and support business activity and household income, investors are sceptical about efforts to stimulate economies that have shut down due to lockdowns and social distancing measures.

The effectiveness of health care policy in containing the spread of the virus, rather than the size of monetary and fiscal stimulus, is likely to be a stronger determinant of sentiment in the coming weeks and months.

In the commercial property markets, just like in other sectors of the economy, the huge disruption caused by the clampdown on travel and commerce has plunged the industry into a period of debilitating uncertainty, dealing a severe blow to leasing and investment activity which were already slowing in most parts of the world before the disease took hold.