There is much speculation over how the deadly coronavirus，which has already reached epidemic proportions，will affect the economy. Will the impact on some enterprises or industries be felt across the broader economy? How much disruption will that cause? While the situation is changing rapidly，we need to make an objective observation without being overly optimistic. As we try to answer these questions，it is essential that we take into account some barely perceptible signs.

First，there is a need for objective knowledge of the epidemic. Although too much pessimism is inadvisable，it is vital to recognize the severity of the situation. Already the number of confirmed global coronavirus cases has exceeded 90,000 or more than 10 times that of Severe Acute Respiratory Syndrome (SARS) as of this writing. The number of fatalities is nearing 3,000. Most of the cases are in China but the number of cases beyond China's borders is rising.

The economic impact of the novel coronavirus outbreak is expected to be much greater than that of SARS，which dragged down China's gross domestic product by about one percentage point. This conclusion is based on the following reasons. First，compared with the SARS situation in 2003，more places have shut down economic activity and the suspension will last longer. Until now，25 cities，contributing more than 90% of China's GDP，have called for an extension of the Spring Festival holiday by at least one week. During the SARS outbreak in 2003，only Beijing's production and business operations were significantly impacted. And the city just accounted for 3% of the national economy.

Second，China is facing greater economic pressures than during SARS period. The SARS outbreak failed to upend economic growth at a time when the nation was starting to benefit from globalization and urbanization as well as demographic changes. During a period where there is already an economic slowdown，the impact of the coronavirus outbreak is likely to be more painful. Third，there is a greater risk of financial contagion now. When enterprises suspend their operations，cash flow dries up and that should add pressure to already leveraged companies. Creditors will feel the pain as repayments are stretched out. Companies may be forced to sell assets. Correspondingly，asset prices will decline，adding further pressure to corporate balance sheets and household finances. Last but not least，the novel coronavirus outbreak has badly affected Wuhan，which is a key link in the industrial chain. As a result，the impact on manufacturing will be greater than that of SARS.

The novel coronavirus contagion will also have a greater impact on the global economy. According to the Brookings Institution，the losses from SARS were the equivalent of 0.1% of the global GDP in 2003. The mainland and the Chinese territories of Hong Kong and Taiwan suffered the most financial damage，accounting for 2.63%，1.05% and 0.49% of their GDP in the same year，respectively. At present，though China's trade surplus has declined sharply since the 2008 global financial crisis，its imports and exports are much larger. Consequently，a much greater impact on the global economy is likely.

As far as China's exports are concerned，a great impact is possible because the coronavirus outbreak has been declared a Public Health Emergency of International Concern (PHEIC) by the World Health Organization (WHO). In past years，the WHO announced five such PHEICs. In each case there was a significant impact on the exports of the affected countries. For example，the outbreak of the Zika virus in Brazil was listed as a PHEIC in 2016. Brazil's export growth fell from 15% in the prior year to a negative 5%. The Brazilian economy stalled in the first half of 2016.

In regard to China's domestic prices，the virus epidemic puts upward pressure on prices. The food component of China's consumer price index rose from 1.8% in March year on year to 3.2% in April during the SARS epidemic in 2003. That was due to higher vegetable prices. The upward pressure on prices lasted through May and June that year，when price rises fell back to 1.9% and 0.4%，respectively. The coronavirus outbreak not only has led to a rise in vegetable prices but has also disrupted the moderation in pork prices after a lengthy surge. The consumer price index rose 5.4% in January of 2020，an eight-year high. It is estimated that this upward trend will continue for at least one to two months.    

Industries such as tourism，transport，accommodation and food services are all expected to be hard hit by the outbreak，as they depend heavily on the ability to move goods and people. Additionally，the industries with high leverage levels and low cash reserves，such as real estate，catering and garments，will also suffer significant damage. In addition，the consumer sector，particularly retailing and catering，are vulnerable as they have high fixed and personnel costs.         

However，there are two sectors that will benefit to a certain extent from the coronavirus. One is home services such as online education，games，logistics，online shopping and live broadcasts. The other is the healthcare sector.  

With respect to assets，the epidemic is not likely to have a significant impact over the longer term. Factors affecting the market are complex，ranging from interest rates to the Sino-US trade war and political developments. But it would be unwise to underestimate the short-term impact. Generally speaking，the outbreak is likely to have an adverse effect on stocks and real estate but help bonds and gold. From experience in the SARS epidemic，the decline in stock prices will be felt immediately. Pharmaceutical stocks and some index heavyweights will hold firm during the outbreak but fall when the epidemic eases. At the same time，outbreaks often mean a bullish bond market until the epidemic eases and interest rates rise. In terms of the property market，though policy plays a leading role，the coronavirus may cool the market for some time. With regard to gold，which mainly reflects the global economy and the movements of the US dollar，there is likely to be a short-term price rise.

Over the duration of the epidemic，it is sensible to prepare for a significant impact but hope for the best.

The author is president of the Rushi Financial Research Institute and a founding partner of Rushi Capital