Trinh Nguyen

Good morning Hong Kong! Landed from LAX & everyone has a mask & the streets are quiet. Mainland China markets open & commodity futures hit the downside limit. CNH weakens more than CNY. The virus is infecting social activities, from tourism to retail & even industrial activities

The number 8 is a lucky number in China & markets are down about today. Note that this is a lot of pent-up selling demand due to the holidays. The uncertainty is also adding to this knee-jerk reaction. Q: How often does SHCOMP fall >8% since 2001? Answer: 4 times excl today.

Dates that SHCOMP fall >-8%: 27 Feb 2007 by -8.8% 4 June 2007 by -8.3% 27 July 2015 by -8.5% 24 August 2015 by -8.5% & today 3 Feb 2020 by -8.4%

What happens the next day for when markets fell >8%? In 2007, it rell each time but by much less. In 2015, fell the next day & so buying the dip was catching the falling knife. What happens tom? Stocks are re-pricing expectations of earnings & question is whether it overshoots.

Here are the key questions for whether this is a short-term (Q1) or a bit longer lasting: a) When'll the infection peak, as in we need to see a containment soon for social activities to resume; b) Effectiveness of support from the gov' to counter the decline of earnings impact;

While u mull on this (not a virus expert so have no idea when contagion'll peak; China bulls tend to estimate this like next wk & bears'll estimate longer lasting cycle), something to think also: Sectors that can stomach this best & worst in China as earnings fall.