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Feb. 1, 2020, 11:28 a.m. EST

5 reasons coronavirus fears are overblown — and 14 stocks to buy now

‘We don’t expect these factors supporting investor confidence and consumer spending to change anytime soon’

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By Michael Brush, MarketWatch


Getty Images
A mother checks her son's forehead in Wuhan, which remained in lockdown for a fourth day on Monday.

Investor fears about the coronavirus are overblown.

So Monday’s biggest one-day percentage declines since early October in the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -3.56%   and the S&P 500 index /zigman2/quotes/210599714/realtime SPX -3.35%   on coronavirus fears have created nice buying opportunities in 14 stocks with lots of exposure to China.

Before we get to those, here are five reasons why investors are panicking too much about coronavirus.

1. Past contagious disease breakouts have been contained

The big unknown here is how deadly and contagious coronavirus is. No one really knows, but medical experts at Johns Hopkins are downplaying the threat from 2019-nCoV, the name for the type of coronavirus grabbing headlines.

“The immediate health risk from 2019-nCoV to the general public in the United States is thought to be low at this time,” says Gabor Kelen, a medical doctor and director of the Johns Hopkins Office of Critical Event Preparedness and Response.

Even if coronavirus turns out to be as contagious and deadly as really bad contagious diseases like Ebola, it will most likely be successfully curbed. The Ebola outbreak a few years ago was effectively kept in check, and so were the Severe Acute Respiratory Syndrome (SARS) outbreak of 2003-04, and the Middle East Respiratory Syndrome (MERS) outbreak early last decade.

“All three outbreaks were contained before they could have a significant impact on the global economy or financial markets around the world,” says Ed Yardeni, of Yardeni Research. “We expect the same outcome with the current outbreak.”

The good news is that health officials learned a lot about containing virus outbreaks from those three experiences.

“Health technology has advanced considerably,” says Andrew Tilton, the chief Asia economist at Goldman Sachs. “Chinese authorities have already sequenced the virus and shared it with the global health community, and the U.S. Centers for Disease Control have just developed a test for the virus.”

Another positive is that public awareness seems to be much higher, because of the more rapid official response in China and the internet and social media, says Tilton. Local authorities in China reported SARS quickly in early January 2003. But up the chain of command, officials dragged their feet. The first official press conference on SARS did not happen until Feb. 11.

Read: CDC officials say coronavirus is similar to SARS, no new U.S. cases reported

2. The lockdown affects a small part of China

But what about the lockdown? Even if coronavirus is contained, won’t the lockdown have a big impact on China’s economy? Probably not, at least as things stand now. The cities locked down are all near Wuhan, in Hubei province, where coronavirus originated. So far, the lockdown affects only around 60 million people out of a population of 1.4 billion.

Likewise, Hubei province only produces about 4.7% of China’s overall GDP, according to the National Bureau of Statistics of China.

Read: 3 reasons coronavirus won’t derail China’s economy

3. The breakout happened at an opportune time

China’s economy was about to wind down anyway for the Chinese New Year celebration when the outbreak occured. So productivity was already scheduled to take a seasonal dip.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,960.80
-1,032 -3.56%
Volume: 458.71M
Feb. 24, 2020 5:04p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,225.89
-111.86 -3.35%
Volume: 2.75B
Feb. 24, 2020 5:04p
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