Sample Healthcare Paper on Impact of COVID-19 on the Australian Stock Performance

Introduction

The declaration of COVID- 19 as a global pandemic by the World Health Organization in mid-march 2020 necessitated all nations to develop response strategies to curb the spread of the virus while still maintaining economic progress. Like other nations, the first action by the Australian government was to curtail close interactions among its citizens by imposing regulations that restricted social gatherings, bans on open air markets as well as restricted movement. Though necessary, the regulations were set to distort the Australian economic by adversely affecting the country’s retail savings and investment market, which was speculated to expand by over 5.5% prior to the pandemic. Soon after the pandemic, the Global-Data was forced to revisit its forecast. Their analysis indicate a plausible decline of approximately 1.1% in 2020.

In 2019, the Australian Bureau of Statistics reported that Australia help the fourth largest pension funds globally. The Australian retail investment Fund had a reported size of AUD381 billion, with a total managed funds tally at AUD 3.59 trillion. However, provisional results suggest that the retail investment fund will decline by0.4%- 1.1%, with a projected recovery in 2021 provided the disease will be contained by then. Specific sectors which are adversely affected by the pandemic include the mutual fund at 16.1% decline, and equity holdings at 11.1% decline due to considerable decline in consumer confidence in the investment sector. As such, investors are likely to record high deposits compared to the last five years where they were more convinced to engage in risky business opportunities. This will increase the Retail holdings with approximately8.8%- 9.8% in 2020.

The interconnection between various sectors in the Australian high net worth market subjects numerous areas to the Covid effects. Retail, fashion and luxury goods and the real estate dealers are particularly out to face significant effects due to the drastic fall in sales and profit margins, despite the fact that this sector accounts for 11.4% of the high net worth market. However, some industries such as the healthcare and technology industries expect an economic boom from the pandemic. The S&P/ASX indicates that the healthcare holdings have improved by 4.3% in 2020. Also, with the transitioning working behavior from office setting to working at home have increased the usage of technological devices and the internet. Further, people are using online platforms to conduct their shopping. FMCG companies are also likely to benefit given that their products will increase or improve thus generating a positive impact to the industry.

Significance of the study

Following a review of the above speculated outcomes from the pandemic, there is a need to determine the specific effects of Corona- virus outbreak on the retail savings and investment industry in Australia. As such, this study seeks to assess the impact of the Corona-virus outbreak on the retail savings and investment industry in Australia. To achieve this, the study will highlight some measures adopted by the Australian government to lighten the impact of the pandemic. This will be followed by a comparison of specific data pre-COVID-19 forecasts and the revised forecasts after the COVID-19 pandemic in the retail, equities, mutual funds and the deposits in the retail savings and investment sector. Following this analysis, new knowledge on the impact of the COVID-19 on the Australian Retail Savings and Investment sectors will be deduced. The study will generate new insight to stakeholders in the Australian stock market such as economists, educators, government and other investors.

Review of literature

Unlike other economic crisis such as the Global Financial Crisis, Covid-19 is likely to disrupt the economy differently. As such, the study reviewed four ways in which the Global Financial Crisis impact differs from the Covid-19 economic impact.

  1. Economic threat

The GFC resulted was an economic crises rising from financial events. As such, it was easily solved by introducing monetary policies that added capital to the global economy to liquidate and turn the economy back to track. Conversely, Covid-19 pandemic is a disease that has disrupted the way people used to function and interact with one another, thus forcing an economic closure and restrict movements, leading to increased financial pressure due to unemployment.

Government response

This means that response measures mainly falls on the government. This demands significant fiscal measures both to business and the citizen, unlike the GFC where national governments responded through Central Banks through consistent monetary easing and asset purchases. Efforts to requests banks to provide leniency to customers with mortgages and business interest costs have been complicated by asset markets making it hard to activate. Also, measures to increase borrowing levels to foster financial stability among affected businesses have been limited by revenue losses experienced by large companies in Australia.

Responses by different sectors

  1. Energy sectors

Though the collapse of the cooperation between the Middle East and Russian producers may be recorded as the main contributors to decline in oil prices, Covid-19 has also posited a significant effect in this decline due to declined demand following curtailed logistic operations.

  • Banks

Banks are directly linked with all economic sectors. With the emergence of the pandemic, bank stock prices and operations have been declined by decrease in investment of short term securities and inability to reduce their deposit rates beyond current limits and reduced borrowing costs. Also, banks are likely to record bad debts in the long run thus affecting bank capital. It should be noted that the Australian government booted capital levels among Australian banks soon after the GFC, thus making Australian banks among the best capitalized banks globally. Further, the government is standby with required support if the market disruption is prolonged.

Industrial/Consumer Industries

Among the most affected sectors include the airline, casino, tourism and gaming stocks. This results from capacity reductions, minimal short-term revenue, high fixed costs, and solvency issues. On the other hand, the supermarkets have experienced a substantial increase in terms of their earnings over this period due to increased consumption.

  1. Retail investments

In 2020, there has been a rise in the overall market volatility, and a decline in the equity prices. An important point to note is that the pandemic has adversely affected the Australian economy, and this has affected the Australian retail savings and investment market. According to the Global Data Financial Services, the retail holdings were expected to increase by approximately 5.5% in 2020. However, Global-Data has been forced to revise its forecasts and estimate that the market will be expected to contract by 1.1% in 2020. A study by Global-Data Financial Services stated that the consumer confidence index declined by approximately 3.6 points in March, as compared to the index that was reported in February of this year, with market forecasts predicting negative impacts unless the pandemic is cured. Equities have declined from 42.6% in 2019 to 38.3%, indicating a 4.3% decline in equities. However, there has been a 5.2% increase in the amounts of deposits to 56.6% as investors speculate for better economic conditions after the pandemic.

 

 

Methodology

This section describes the act to be followed to deduce study results and findings to be subjected to the analysis for the completion of the study.

Data collection

Data in this study will be collected from the ASX-20. The Dow Jones Global Index, which is an international index, which reflects the overall performance of the stock markets globally will be used as a benchmark index. Also, the study will review stock market performed in the previous years to determine the impact of the COVID-19 pandemic on the Australian retail savings and investment market. The data that will be collected will be divided into two sections: ASX-20 data before the first case of the COVID-19 was reported in Australia, and the second set of data will be after the Australian government introduced its response measures after the first cases of the COVID-19 pandemic were reported in the country.

Expected results

Decline in terms of the pre-COVID and post-COVID forecasts in the retail, deposits, mutual funds and equities in the retail savings and investments sector is expected in the study. Further, the study may yield increase in the cash- and fixed income-investments. Cash investments, which can be in the form of savings accounts will increase because of the promise that they can provide stable and a low-risk income source for the potential investors who will receive regular interest payments. Fixed income investments which may be in the form of bonds will also be a highly likely option for the investors. Also, there is a speculated decline in the number of purchases of equities both for the Australian and international companies due to poor performances among businesses which decline share prices and dividends thus discouraging investors.