The effect the coronavirus is having on markets around the world presents a good investment opportunity for individuals in the short term, a global fund manager has said.
“Effectively the coronavirus could actually set us into a period of even further lower interest rates that has a very interesting dynamic for valuations when people’s panic stops. So if there are any severe dips here, my advice to people would be buy on the severe dips here and expect more volatility,” Magellan Financial Group chief investment officer Hamish Douglass said at his organisation’s global investor evening in Sydney last week.
“You’re very unlikely to pick the bottom of any of these ups and downs … and I suspect we’re not at the end of these interest rate cuts through coronavirus at the moment.”
Douglass said the effect the virus is having on markets does not mean individuals have to change their approach to investing.
“[This event] will look very ugly potentially for markets and volatility in the very short term, but am I doing anything fundamentally to change our portfolio we have? No I’m not,” he noted.
He highlighted his strategy through Magellan Financial Group’s attitude towards its holdings in Starbucks.
“Starbucks closed half of their stores in China. It’s just said [the coronavirus] is going to have a severe impact on their China business in the next three months. We know that,” he said.
“Its share price is being affected somewhat. If it gets affected a lot, buy Starbucks would be my advice to you because in 12 months’ time it won’t have any real impact on the long-term value of a Starbucks.”
As such, his message is for investors not to panic and react to the short-term economic impact of the coronavirus because it is currently very hard to gauge as it depends upon the spread of the disease and the response to it.