Although Coronavirus is a health emergency, the impact has been well and truly felt in the financial market. Chinese stocks have fallen, along with the Chinese currency, and trading markets are showing heightened signs of caution.
However, it’s not just China that is suffering, with London’s FTSE 100, European Stoxx 600, and Germany’s Dax all dropping over the past few weeks due to panic regarding the health emergency.
Why is a health emergency impacting the financial markets?
But why is a health emergency influencing the way people trade and invest? Speaking to Finance Magnates, Dr. Dan Pallesen, a licensed clinical psychologist and the Chief of Investor Behavior for Keystone Wealth Partners, said that during high-stress, emergency situations such as Coronavirus, people tend to feel afraid, as fear is one of our most powerful tools to ensure our survival.
“Our brain, though incredibly complex, has one primary task. And that task is to keep us alive,” Pallesen explained. “Our brain does this by making sure we avoid threats. We all exhibit what has been called a ‘negativity bias.'”
“We are wired to feel the pain of loss to a greater extent than we feel the pleasure of gain. In other words, losses hurt worse and for longer than gains feel good. We avoid losses to greater extents than we pursue gains. Even the thought of a potential loss activates the pain centers in our brains.”
It is because of this, Pallesen explains, that during times of emergency situations, people do not always invest rationally, and instead opt to invest in things that feel familiar or safe. Using this logic, it explains investors moving away from Chinese and Asian assets – where the threat emerged and away from higher-risk investments.
How is Coronavirus impacting client acquisition?
With health emergencies such as Coronavirus spooking investors away from certain assets and overall, contributing to people investing less, what type of effect does this have on user acquisition?
The answer may surprise you. For numerous brokerages, it appears that Coronavirus has not been as detrimental as one would assume; in fact, for international broker RoboForex, it might have even been a bonus.
Denis Golomedov, the CMO at RoboForex, explained to Finance Magnates: “Any emergency situations, including major problems in health care, surely affect different aspects of human life and financial markets are no exception. Nowadays, we clearly see how the new Chinese Coronavirus influences the quotes of public companies, which are in one way or another involved in international business.”
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“The commodity sector is experiencing a huge pressure right now. It’s a very powerful factor that greatly impacts the global economy and any changes offer a lot of different opportunities for investing and trading.”
“As for changes relating to client engagement, we don’t see any declines here. On the contrary, what we see is the growth in active clients and the number of new registrations. Our clients are very actively trading and the portfolio of traded instruments has significantly increased over the past year. The same is observed in the volume of traded instruments.”
Skilling, another forex broker, has not seen any noticeable impact on client acquisition. In fact, the broker has seen an uptick in clients joining over the past two weeks. However, as highlighted by Pavel Spirin, Chief Marketing and Business Development Officer of Skilling, this growth is the result of ongoing brand and marketing campaigns, rather than being virus-related.
The total impact of Coronavirus is not yet clear
ATFX, a forex broker, also said that it has not seen any material changes to its operations since the threat of Coronavirus. Speaking on behalf of the firm, Jeffrey Siu, Chief Operating Officer of ATFX Group outlined to Finance Magnates: “We have not seen any material changes in the number of new clients signing up for our services across the world. As a globally established company with 13 offices worldwide, our business spans numerous markets, which provides us with a global balance of clients both in the retail or institutional spheres, limiting our overall exposure to any single region…”
“Currently, we do not have the complete picture of how the Coronavirus will affect our business, given that we are still in the traditionally low season. We’re closely monitoring the situation and will have the actual figures by Q2. Also, we would like to remind our clients to pay close attention to their investments during this uncertain period.”
Providing his insight of the situation from the trading floor, Market Analyst at FXGate.com Ahmed Mamdouh said: “For versatile FX traders, abandoning trading due to the outbreak of the Coronavirus is not the best idea, but, oppositely, traders tend to take advantage of the fears in markets by finding out the most profitable assets. Safe havens should offer good opportunity at times of panic, yet the U.S. dollar and cryptocurrencies are currently the best performers.”
Crypto remains resilient
It appears that Coronavirus also hasn’t managed to have too much of an impact for trading on cryptocurrency exchanges, which is surprising considering that crypto assets are largely thought of as high-risk due to their volatility.
Marie Tatibouet, the CMO at Gate.io, a global blockchain asset exchange platform, explained to Finance Magnates: “Even though 80 percent of our users are based in Asia, we haven’t seen a substantial decrease in our trading activities since the coronavirus outbreak. Our facilities and backend processes are running smoothly, which is why none of the user trading requests have been affected. In fact, there has been a surge in our overall trading volume due to the recent Bitcoin growth.”
“However, due to the cancellation of some of the blockchain conferences and events in Asia, there is a slowdown in the overall community interaction. This would definitely affect companies that had their marketing efforts planned ahead of time.”