19 Mar 2020
Posted in Business Fundamentals
Investors’ confidence and funding activity plummet amidst coronavirus risks
Concerns around the coronavirus (COVID-19) outbreak in China and its subsequent outbreaks in several other nations are expected to have a large impact on the global economy, which is also hurting investor sentiments. As investors are wary of gloomy economy prospects, COVID-19 emerged as a topic of discussion for investment firms, according to GlobalData, a leading data and analytics company.
With the pandemic becoming a major threat for the global economy and financial markets, key institutions have lowered their forecast for global GDP growth. For instance, Organization for Economic Co-operation and Development (OECD) in its Interim Economic Outlook report forecasted global real GDP growth to decline from 2.9% in 2019 to 2.4% in 2020. Investors see China as a promising market and are concerned about COVID-19’s impact on the country’s economy as well the gloomy economy outlook.
GlobalData’s Company Filing Analytics platform found that investors have begun discussing coronavirus in their earnings transcripts, focusing on concerns and uncertainties revolving around the virus. For instance, investment firm Carlyle group acknowledged the impact of the COVID-19 outbreak on the global economy and the ongoing uncertainty around it.
Similarly, another investment firm, Bain Capital, stated that it is accessing the impact of the outbreak on the performance of its portfolio companies. The firm also expects a slowdown in deal activity over the course of the next few months.
Investor concerns and dampened sentiments also reflect in weak private equity (PE) and venture capital (VC) funding activity during the first three months (January 1st – March 17th) of 2020 compared to the first three months (January 1st – March 17th) of 2019.
The number of PE and VC deals announced during March 1, 2020 to March 17, 2020 fell by 32.4% compared to the deals announced during the same period in 2019, while corresponding deal value also declined by 26.5%. January and February month of 2020 also witnessed notable decline in funding activity.
Aurojyoti Bose, Lead Analyst at GlobalData, says: “The coronavirus outbreak is affecting the global economic prospects at least for the short-term and dampened investor sentiments are likely to persist for some time. A vigilant approach and risk aversion could be the probable strategy for investors in the near-term.”