(Yicai Global) Feb. 5 -- Chinese regulators' decision to re-open the stock markets on Feb. 3 despite the ongoing spread of the novel coronavirus from Wuhan was a positive move and encouraging for investors, Chairman Shan Weijian of Hong Kong-based private equity fund Pacific Alliance Group told Yicai Global in an exclusive interview.
Below is a transcript of the discussion, in which Shan says investors should stick to thinking long term while managing short-term volatility.
Yicai Global: The Coronavirus outbreak is still not under control, but Chinese markets are mounting a recovery from Monday's rough start. The US and European equity markets all seem to be shrugging off the impact of the virus, why is that?
Shan Weijian: I must say that it is positive and encouraging that the regulators allowed the stock market to open [on Feb. 3]. They must have known there would be strong selling pressure in view of the outbreak. They could have waited as almost the entire country is still on holiday. The fact that they let the stock market open reflects their confidence in the market and reflects their willingness to let the market find its own equilibrium without administrative interference. It is good for the market and for the investors. It represents a major progress in regulatory thinking.
YG: How great do you imagine the impact will be on China's economy during the first quarter and this year on the whole?
SW: No question the economy will be negatively affected by the measures taken to fight the outbreak. But if SARS provided any guidance, this should be temporary, followed by strong rebounds once the disease is brought under control as inevitably it will be. The whole-year effect depends on how long it will take to contain the spread of the virus. I hope it won't last long.
YG: What's your take on the impact on the overall global economy and asset markets for equities, bonds, commodities -- especially oil -- in the short- and long term? How should investors prepare?
SW: The disease-induced economic slowdown in China will adversely affect the growth rate of the global economy. But once the disease is brought under control, the rebound will help rejuvenate global growth. As an investor, I would focus on long-term fundamentals while managing short-term volatility.
YG: What financial tools does the Chinese government possess to minimize the damage caused by the coronavirus outbreak?
SW: The Chinese government finances are among the healthiest in the world. It should have ample means to deal with short-term problems. It is reform measures which will help the long-term growth, which is the reason why letting the stock market open in spite of the current challenges is significant as it is a sign the government trusts the market and cares about investors, including foreign investors.
Editor: Tang Shihua, Zhang Yushuo