Thread by @Trinhnomics

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.

Here is a paper forecasting that it will peak in Wuhan on 20 April 2020 & other cities 1-2 wks later. So we're looking at Q2 not just Q1 if this were true.

thelancet.com/journals/lance…

There you go, markets closed roughly down -8% for China

Btw, Hong Kong economy shrank -1.2% in 2019 & the bad news is that 2020 won't be better given this virus that basically shuts most activities down in Q1 2020 & maybe even Q2 2020...

😬😬😬