Summary of my analysis of the effect of the COVID-19 pandemic on financial markets as of 13th May, 2020. Course: ESM 644 Financial Management for Engineers Program: Masters in Engineering Systems Management Affiliation: American University of Sharjah, College of Engineering, Department of Industrial Engineering

1. Effect of
COVID-19 on
Financial
Markets
Final Research Project
Presentation
By: Arwa Abougharib

2. Overview
of Five
Financial
Markets
Analysis of news reports
and their influence on the
top 4 largest financial
exchanges and the UAE
US: New York Stock Exchange
Japan: Japan Exchange Group
UK: London Stock Exchange
China: Shanghai Stock Exchange
UAE: Abu Dhabi Securities
Exchange
Understand the real drivers of the market
and lessons learned
Prospects for global financial markets

3. United States
Crash Uptrend
18/2: IEA cuts oil
demand forecast
15/3: Fed pledges to
buy as many
securities as needed
to keep the stock
market functioning
No. of COVID-19
cases increases in
China & S. Korea
Traders dump stocks
and turn to bonds,
gold, medical and
consumer staples
25/3: Stimulus bill
passes the Senate
(after 2 failed
attempts)
23/3: Stimulus bill fails
to pass the senate
20/2
23/3

4. Japan
Crash Uptrend
5/2: Japanese
automakers report
profit slump due to
unfavorable
exchange rates
and exposure of
S.C. to China
10/3: Central Bank
introduces stimulus
package to supports
SMEs & individuals
16/3: BoJ announces
expanded buying of
stocks and bonds +
1-yr, 0-interest, direct
loans to companies
7/2
16/3

5. UK
Crash Uptrend
18/2: IEA cuts
oil demand
forecast
11/3: BoE cut rates to
0.25% + stimulus
package
8-9/3: Saudi-
Russian oil price
war
17/3: Govt-backed loan
packages announced &
grants + Mortgage
holiday
19/3: BoE cuts rates
(again) to 0.1% +
bond-buying program
21/2
19/3

6. China
1
2 3
4

7. Phase 1: First Crash
• 14/1: First case outside of China
confirmed (in Thailand)
• 13-22/1: Virus spreads to more countries
• 21/1: Cancellation of Lunar Year
celebrations
• 22-23/1: WHO meeting
• 23/1 – 3/2: New Lunar Year Holiday
• 25/1: Quarantines extended to 13 cities
• 30/1: WHO declares PHEIC
14/1
3/2

8. Phase 2: Bull run
• 2/2: Central bank announces cash
injection into money markets and lower
lending rates
• 9/2: Some factories outside Hubei
province allowed to reopen
• 20/2: First sign of ‘curve flattening’
• 24/2: Govt. encourages people to return
to work, but with restrictions
• Hypothetical Scenarios:
• Informal collective agreement, fueled by a sense
of patriotism
• Investors purposefully buying ‘into the dips’
3/2
27/2

9. Phase 3: Second
Crash
• 6/3: OPEC meet to discuss production
cuts; Russia refuses to cut production
further
• 9/3: Saudi Arabia announces ramping up
production and slashing prices in April
once the current OPEC agreement ends
• 22/3: Hoped recovery of US markets
delayed as stimulus bill fails to pass the
Senate
6/3
23/3

10. Phase 4: Slow
Recovery
• 25/3: Positive response to the passed
stimulus bill in the US
• 9/4: Russia agrees to production cuts
• Chinese market trend ‘decouples’ from oil
a few days later
25/3

11. UAE
Crash Uptrend
27/1: Banks hit due to
disappointing
earnings
16/3: Abu Dhabi
introduces
stimulus package
for SMEs
29/1: First confirmed
case of virus
18/2: IEA cuts oil
demand forecast
22/3: Additional
stimulus package
8-9/3: Saudi-Russian
oil price war
12/3: Travel bans
17/3
24/2

12. Lessons Learned
I. The oil prices affects both developed and undeveloped nations, regardless of
diversification
II. The fundamentals (and death rates) don’t really matter in Chinese markets
III. Government systems with concentrated power are more effective and efficient
in critical times, when the correct actions are taken
IV. Quantitative Easing and Zero-Interest Rate Policy are not tried and trusted, but
the American, Japanese, and British stock markets are addicted to them
V. It may be more effective to bypass banks and lend directly to businesses &
individuals, e.g. UAE and S. Korea

13. Prospects? It
depends…
• On average, global markets have
experienced positive increases 1-month,
3-months, and 6 months in the periods
following an epidemic
• But COVID-19 may threaten a second
wave upon easing quarantine measures,
if so:
• A second lockdown would send both stock
markets and fundamentals into a worse crash
until a vaccine/treatment is found
• If production returns to normal despite the virus
spread, global markets can go up again (at the
cost of human lives)
Source: https://thetokenist.io/how-does-the-covid-19-stock-market-crash-compare-to-past-epidemics/

14. Thank You!
Q & A