Safe-Haven ETFs Rally as Coronavirus Cases Surge

·3 min read

The sudden rise in the number of confirmed cases from the ground zero of the coronavirus outbreak Hubei province to 14,840 on Feb 12  from the 2,015 new cases reported a day earlier has stunned market participants. Impacting the risk-on sentiments, the count for new fatalities also rose to 242. The numbers surged as China started applying a new clinical method for diagnosis. In fact, the new total now includes "clinically diagnosed cases", in order to make appropriate treatment rapidly available for patients. Patients exhibiting the symptoms of Covid-19, who have not been scientifically tested or died before getting tested, come under the "clinically diagnosed cases" definition.

Notably, the coronavirus eruption has already resulted in more than 1,300 deaths in China, along with the 48,206 confirmed cases in the Hubei province. In fact, 44 new cases have been confirmed on a cruise ship that has been quarantined in Japan, resulting in the total number of cases rising to 219. In addition, Citi bank has already downgraded its 2020 GDP estimate for China to 5.3% from 5.5% (read: ETF Strategies to Mark as Virus Scare May Hit Global Growth).

The latest uptick has impacted the risk-on sentiments of the market participants, spurring demand for safe havens. In this regard, an economist at National Australia Bank  has commented that “the unfortunate increase in number of cases in the Hubei province, which is ground zero... has affected risk-on sentiment”. Markedly, the yield on the 10-year U.S. Treasury  notes shrunk 3 basis points to 1.607%. Also, the yen has surpassed 110 per dollar.

It is worth noting here that the World Health Organization (WHO) has already announced that the virus poses a "grave threat" globally. Furthermore, the WHO chief, Tedros Adhanom Ghebreyesus, has commented that the coronavirus eruption could result in "more powerful consequences than any terrorist action" (read: Pick These US Small-Cap ETFs to Fight the Coronavirus Scare).

ETFs to Snap Up

Treasury Bonds 

iShares 20+ Year Treasury Bond ETF TLT

Heightened global uncertainty brings this safe asset into the limelight. The Fed rate cuts this year and geopolitical concerns might drive treasury valuation. Apart from TLT, investors can consider 25+ Year Zero Coupon U.S. Treasury Index Fund ZROZ  and Vanguard Extended Duration Treasury ETF EDV (read: 10 Most Heavily Traded ETFs of 2019).



Gold is often viewed as a safe-haven asset offering protection against financial risks, and will likely perform well on heightened market volatility (read: Most Loved/Hated ETFs of the Fourth Quarter).

Apart from GLD, investors can consider iShares Gold Trust IAU, another popular choice in this space.

Invesco Currency Shares Japanese Yen Trust FXY

The Japanese currency yen is often considered a classic safe-haven asset that has gained some strength, of late. Japan’s huge holdings of foreign assets help it gain the safe-haven status among investors. Investors can target this currency via FXY, which measures the value of yen against the greenback (see: all the Currency ETFs here).

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iShares 20+ Year Treasury Bond ETF (TLT): ETF Research Reports
SPDR Gold Shares (GLD): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
Invesco CurrencyShares Japanese Yen Trust (FXY): ETF Research Reports
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ): ETF Research Reports
Vanguard Extended Duration Treasury ETF (EDV): ETF Research Reports
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