Coronavirus: why life after global lockdown will be a step into 'unknown territory'


Daniel Bardsley
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  • Arabic

Related: The WHO's six step guide to easing coronavirus lockdowns

More than three months on from the emergence in Wuhan of Covid-19, the lockdown gripping the Chinese city was finally lifted last week.

After a 76-day ban on travel, authorities allowed train, road and air links to start up after China’s infection rate plummeted to the extent that most new cases now involve people entering the country.

Some major Chinese population centres, such as Shanghai, plan to reopen schools this month, while restaurants are reopening in Beijing, albeit with tables kept apart.

While the UAE's stay-home orders and restrictions on travel continue, with the exception of allowing some shops to open for Ramadan, governments elsewhere are following China's lead in allowing some businesses to open amid concerns over the economic effects of shutdowns.

At this stage of this new virus, it's better to overreact in favour of stopping the virus rather than the other way around

Austria is allowing garden centres to trade, some regions of Italy are permitting shops to open, while in Spain, where the rate of new infections has fallen, construction is starting up and factories are reopening.

Trying to predict what effects such loosening of restrictions may have is made more difficult by the fact that the coronavirus pandemic involves a new pathogen.

However, earlier outbreaks of another viral infection, influenza, offer pointers, even if infection patterns may not be the same.

Several years after the 2009 swine flu pandemic, where about one billion people are thought to have been infected and about 300,000 died, researchers concluded that closing schools in June that year curtailed a major outbreak, only for their reopening three months later to trigger new infections.

In a world where a small minority is immune to the novel coronavirus, the World Health Organisation has warned that infection rates could spike if lockdowns are lifted too early.

A number of academics, including Professor John Oxford, emeritus professor of virology at Queen Mary University of London and co-author of the textbook Human Virology, favour such a cautionary approach.

Saying that “all of us need patience”, he indicated that high levels of testing, quarantine and isolation, and continued lockdowns, were required.

The 1918 to 1920 Spanish flu pandemic is thought to have cost more than 50 million lives and was described by a Yale University academic writing in 1923 as, apart from the First World War, “perhaps the most terrible calamity that has afflicted the world since the Black Death of the fourteenth century”.

As outlined by the United States Centres for Disease Control and Prevention, measures to prevent infections included the use of disinfectants, better personal hygiene, isolation and quarantine, and limits on public gatherings.

A 2007 study by UK and Netherlands researchers published in the Proceedings of the National Academy of Sciences of the USA found that no US cities found the "optimal point" at which interventions produced a peak of minimal size during the 1918 outbreak. Nonetheless, the conclusions may be useful for today's policymakers.

“The cities that got closest to the theoretical maximum possible reduction in mortality were those that implemented both early and effective interventions throughout the first peak and then were able to reintroduce these when transmission again increased,” the authors wrote.

In 2013 researchers set out, using complex statistical methods, to tease apart the factors that may have affected 1918-20 pandemic’s complex pattern of infections, which saw some areas hit by as many as three outbreaks.

School openings and closures had an influence, as did the weather, because the infection rate fell as temperatures increased. Most important, though, was human behaviour, because people appear to have reduced contact with others in response to the outbreak.

Viral evolution may also affect a pandemic, creating a risk of later outbreaks if the pathogen becomes easier to transmit or more difficult for the immune system to fight off, mirroring the situation when a population lacks widespread “herd” immunity.

“We have to be very, very careful,” Prof John Oxford said, adding that China’s example “definitely” showed the importance of strict containment measures.

“You cannot be more strict than they were. They’ve knocked the virus on the head.

“At this stage of this new virus, it’s better to overreact in favour of stopping the virus rather than the other way around.”

Ultimately, though, with a new virus, the outcome remains uncertain. The world is, said Prof Oxford, “walking into unknown territory”.

How Tesla’s price correction has hit fund managers

Investing in disruptive technology can be a bumpy ride, as investors in Tesla were reminded on Friday, when its stock dropped 7.5 per cent in early trading to $575.

It recovered slightly but still ended the week 15 per cent lower and is down a third from its all-time high of $883 on January 26. The electric car maker’s market cap fell from $834 billion to about $567bn in that time, a drop of an astonishing $267bn, and a blow for those who bought Tesla stock late.

The collapse also hit fund managers that have gone big on Tesla, notably the UK-based Scottish Mortgage Investment Trust and Cathie Wood’s ARK Innovation ETF.

Tesla is the top holding in both funds, making up a hefty 10 per cent of total assets under management. Both funds have fallen by a quarter in the past month.

Matt Weller, global head of market research at GAIN Capital, recently warned that Tesla founder Elon Musk had “flown a bit too close to the sun”, after getting carried away by investing $1.5bn of the company’s money in Bitcoin.

He also predicted Tesla’s sales could struggle as traditional auto manufacturers ramp up electric car production, destroying its first mover advantage.

AJ Bell’s Russ Mould warns that many investors buy tech stocks when earnings forecasts are rising, almost regardless of valuation. “When it works, it really works. But when it goes wrong, elevated valuations leave little or no downside protection.”

A Tesla correction was probably baked in after last year’s astonishing share price surge, and many investors will see this as an opportunity to load up at a reduced price.

Dramatic swings are to be expected when investing in disruptive technology, as Ms Wood at ARK makes clear.

Every week, she sends subscribers a commentary listing “stocks in our strategies that have appreciated or dropped more than 15 per cent in a day” during the week.

Her latest commentary, issued on Friday, showed seven stocks displaying extreme volatility, led by ExOne, a leader in binder jetting 3D printing technology. It jumped 24 per cent, boosted by news that fellow 3D printing specialist Stratasys had beaten fourth-quarter revenues and earnings expectations, seen as good news for the sector.

By contrast, computational drug and material discovery company Schrödinger fell 27 per cent after quarterly and full-year results showed its core software sales and drug development pipeline slowing.

Despite that setback, Ms Wood remains positive, arguing that its “medicinal chemistry platform offers a powerful and unique view into chemical space”.

In her weekly video view, she remains bullish, stating that: “We are on the right side of change, and disruptive innovation is going to deliver exponential growth trajectories for many of our companies, in fact, most of them.”

Ms Wood remains committed to Tesla as she expects global electric car sales to compound at an average annual rate of 82 per cent for the next five years.

She said these are so “enormous that some people find them unbelievable”, and argues that this scepticism, especially among institutional investors, “festers” and creates a great opportunity for ARK.

Only you can decide whether you are a believer or a festering sceptic. If it’s the former, then buckle up.

Profile of Tamatem

Date started: March 2013

Founder: Hussam Hammo

Based: Amman, Jordan

Employees: 55

Funding: $6m

Funders: Wamda Capital, Modern Electronics (part of Al Falaisah Group) and North Base Media