The fear may cause more economic impact than the virus itself, says Jefferies

"Market was complacent, now it is becoming more realistic and earning downgrades are happening, it shouldn’t take that long before the economic impact is more fully reflected,” said Peng.

When asked if he agreed with Peng that it was a matter of weeks that the virus is brought under control or starts to show decline, Powell said, “I have a more pessimistic view. I think what happened in China and it could only happen in China – to create or to basically almost lock-up a large group of the population for four weeks who compliantly agreed to it and rest social distancing. Imagine trying to do the same thing in North America, it could be quite challenging and I have spoken to a number of epidemiologists who are starting to form a view that potentially containment may not work that actually you cannot contain this thing, it is out in the wild already and what systems need to be doing is prepare for the onslaught of cases."

However, there is some optimism because this is a virulent virus but the case of fatality rates are significantly lower than we have seen with other pandemics like severe acute respiratory syndrome (SARS) and Middle East respiratory syndrome (MERS) and so the chances of dying is substantially lower,” Powell added.

With regards to weeks versus months, Powell said the market will look through all of this and look for a rebound absolutely. "However, it will come down to consumer sentiment - how quickly - as this passes - would people want to go back out and start shopping and going to restaurants and getting their haircut again and a lot of that is to do with school closures and fears. School closures is a big issue too. Japan announced school closures from March 4, we will see school closures in the US. In Hong Kong too schools are closed until Easter. School closures dampen economic activity because when you are at home looking after your kids, you are not out working or spending and the market needs to figure out when to start pricing-in a rebound,” Powell further added.

When asked about global growth, Peng said, “In China’s case, the worst of the growth decline would be in Q1. Then Q2 should be the beginning of the rebound. However, with the world months behind China in terms of the virus development, you would expect the trade and tourism activities continue to be pretty sluggish even in Q2 especially outside of China. So that is going to have some indirect impact on China as well."

"We had previously expected a 5.8 percent growth in China and are now looking at 5.3 percent. For global growth, we had revised down from 2.7 to 2.5 percent but the downside risk is probably larger in the global growth number there,” Peng addded.