A COVID-19 Contagion for the World’s Stock Markets

By Donghyun Park, Shu Tian

These charts illustrate how Asian and global stock markets reacted to the COVID-19 pandemic, with market reaction closely following local outbreaks and then moving in unison with global markets amid other shocks.

Equity markets in Asia and around the world reacted strongly to local outbreaks and global shocks caused by the COVID-19 pandemic. While COVID-19’s impact on the real economy depends on how the pandemic evolves, global financial markets reveal how investors around the world gradually price in the adverse impacts as the virus spreads.     

Local market reactions were first observed in the People’s Republic of China and Hong Kong, China when prices dropped in late January as COVID-19 cases climbed, then stabilized around mid-February when the outbreak showed signs of stabilizing. Since late February, these markets followed global market patterns during global shocks, including plummeting oil demand. With strong fundamentals going into the crisis, the health and technology sectors reacted to the pandemic by performing strongly in terms of equity value.


Other markets reacted as more cases were reported locally in the second of half of February. They then moved in a similar pattern to global markets when investment sentiment soured in March. Health and Tech remained market leaders with energy slumping. Such trends can be seen on a global scale, where the downturn in energy stocks, driven by a shock in oil production, is more pronounced than the modest gains posted in the health and technology sectors.


Coronavirus shocks to financial markets largely occurred at the aggregate market-wide level with individual sectors generally moving together, and the reactions became more pronounced when the outbreak intensified in a specific region. When the full scope of the global pandemic became more evident from the last week of February to the end of March, the downturn in markets could be seen spreading from country to country. By early April, global stock markets collectively showed signs of stabilizing as investors gradually priced in the negative impacts of COVID-19 on economic activities, and the market liquidity situation improved. This was driven in part by monetary and fiscal policies introduced by governments to mitigate such impacts.

Timely, effective, and coordinated policy responses are needed to avoid a global COVID-19 impact on the world’s stock markets, or worse, a financial market meltdown. The ongoing crisis is driven by health issues, not by the fundamentals of Asian and global economies, in contrast to previous economic crises. As a result, if the health crisis is dealt with swiftly, the economic recovery could be rapid as well.