Heisenberg Report

Palpable Angst, ‘Deep Regret And Condolences’ As Virus Fears Return

Risk appetite waned on Friday, as equities retreated with bond yields amid renewed concerns around the scope of the coronavirus outbreak and more dour data out of the euro-area.

The tale of the Diamond Princess cruise ship in Japan is starting to sound like the script for a medical drama. Out of 273 passengers and crew who have so far been tested, 61 have the virus. There are 3,700 people on the vessel, which is quarantined at the port of Yokohama. Obviously, the close confines make it more likely that the virus will spread, but disembarking apparently isn’t a viable option given the number of people with the virus.

Now, Japan has to decide how many of the passengers to test, which ones to prioritize and who to follow up with once the quarantine is over. Some on board are tweeting. As you can imagine, they aren’t in good spirits.

It is, to put it mildly, a vexing situation.

Passengers confirmed to be stricken with the virus include seven from Australia, seven from Canada, three from Hong Kong, one from Argentina, one from New Zealand, one from Taiwan, 11 from the US, and 28 from Japan.

Another ship is being denied entry and a third cruise liner with 3,600 aboard, is being held off Hong Kong.


Xi, meanwhile, has a public relations problem on his hands.

Li Wenliang – a physician who was sanctioned by local authorities last month after raising alarm bells on the virus – died of the disease on Friday. He was just 34, and left behind a pregnant wife and small child. A bungled effort to spin a narrative around his final hours made things immeasurably worse.

“[He] had the misfortune to be infected during the fight against the novel coronavirus pneumonia epidemic, and all-out efforts to save him failed”, the Wuhan City Central Hospital said, in a Weibo post. “We express our deep regret and condolences”.

Apparently, that isn’t exactly how things unfolded. Reports of his untimely death surfaced hours previous, but were removed and ultimately replaced with story about heroic efforts to save his life, very possibly after he was already dead.

In any event, the hero is Li himself. “When Dr. Li posted his chat room warning on December 30, the new coronavirus had not yet been identified. He said it resembled Severe Acute Respiratory Syndrome, or SARS, an earlier coronavirus that ravaged China nearly two decades ago”, The New York Times writes, recapping the final, dramatic months of the ophthalmologist’s life. “In early January, he was called in by both medical officials and the police, and forced to sign a statement denouncing his warning as an unfounded and illegal rumor”.

State media attempted to clumsily fuse his death to the “people’s war” narrative, an awkward effort to graft a potentially damaging tale of censorship to a nationwide call for unity in the face of an acute crisis. “That Li Wenliang could not escape having his life snatched away shows that this is an arduous and complex battle”, one Party mouthpiece wrote. “At this critical juncture, all of us must be united”.

As Bloomberg details, “the top-trending hashtag ‘I want freedom of speech’ was no longer searchable on Weibo [and] the song ‘Do You Hear the People Sing’ from Les Miserables, was removed from several local music services after many posted it on social media, in the hours after Li’s death”.

Last week, in an interview with The Times via text message, Li was as forthcoming as he could be without jeopardizing himself any further. “If the officials had disclosed information about the epidemic earlier I think it would have been a lot better”, he remarked. “There should be more openness and transparency”


But fear not, good people of the mainland, Donald Trump is on it.

“Just had a long and very good conversation by phone with President Xi of China. He is strong, sharp and powerfully focused on leading the counterattack on the Coronavirus”, America’s cartoonish commander tweeted, before dawn on Friday.

Details of the call were released late Thursday, but Trump felt like he should tweet about it too. “Xi feels they are doing very well, even building hospitals in a matter of only days”, Trump went on to marvel, adding that “nothing is easy, but he will be successful”.

Trump then cited prospects for warmer weather as a possible factor that may help mitigate the spread in China. “Great discipline is taking place, as President Xi strongly leads what will be a very successful operation”, he continued, in remarks that could have walked right out of a Global Times editorial. “We are working closely with China to help!”

The death toll in China hit 636 on Thursday. Confirmed cases are now up to 31,161.

“The number deaths and confirmed cases of the nCoV has already surpassed that of SARS in 2003. nCoV has already proven to be far more contagious than SARS, but perhaps less lethal”, Nomura’s chief China economist Ting Lu wrote, in an expansive note dated Thursday. “Despite Beijing’s somewhat reluctant admission and slow initial response to the virus, since around 20 January it has redoubled its efforts to contain the outbreak”, he added, on the way to warning that “based on the spread of nCoV and the governments’ draconian response (including enforced lockdowns of a number cities and numerous villages), it is quite clear that nCoV is already having a much more significant impact on China’s economy than SARS did in 2003”.

(Nomura)

Unnervingly, reputable media outlets are now starting to cite a “rumor” that circulated earlier this week suggesting the official numbers around deaths and infections may be woefully understated.

To be clear, the figures are surely understated due to the logistical impossibility of collecting the data in a country that large. And, of course, Beijing is keen to avoid sparking a panic or doing anything that might increase the odds of social unrest. The question is how much of any underreporting is deliberate.

Foxconn on Friday told staff to stay away from its Shenzhen facility when the Lunar New Year break (which was extended) ends next week. “To safeguard everyone’s health and safety and comply with government virus prevention measures, we urge you not to return to Shenzhen”, a text message sent to employees seen by Bloomberg reads. “We’ll update you on the situation in the city”.