Don’t be Afraid, Moduers!
Fear – What immediately comes to your mind when you hear the word ‘fear’?
I’m quite sure currently many of you will immediately think of Corona Virus (COVID-19) when you hear the word ‘fear’. Yes, COVID-19 that started in Wu Han, China and has now spread to more than 152 countries and infected more than 200.000 people. Domestically in Indonesia, COVID-19 has infected 309 people with 25 deaths (as of 19 March 2020).
Other than COVID-19 that you might think of after hearing the word ‘fear’, currently many of you might also think about market globally, including Indonesia, that has been corrected deeply within the year 2020. JCI has corrected almost 35% throughout 2020 (data as of 19 March 2020) and reached the lowest level since September 2015. This market correction is mainly caused to due market fear of the impact resulted from COVID-19 that could slow down economic growth globally.
However, do you know that there is an indicator that could measure fear level in capital market?
Volatility Index (VIX)
Volatility index (VIX) is an indicator that is used to show the market fear level. Higher VIX index represents increasing market fear. From this VIX index, we could see that COVID-19 has increased market fear level where VIX index has increased to a high level similar to the level during economic recession that ever happened historically. However, this VIX index again decreased along with decrease in the market fear and return of investor confidence to capital market.
Fear in the market could be seen from the panic selling action that has been going on lately in the market globally, including Indonesia. Yes, when market sees there is risk such as COVID-19 that might cause slow down in global economy, market tends to choose investment instrument with lower risk and hence sell-off in equity market happened. This is proven by the deep correction in JCI throughout the year 2020.
Similarly, fear is also shown through the panic buying action that has happened since the COVID-19 breakout starts increasing. Do you ever experience going to supermarket with an extremely crowded condition and sold out stuff? Or probably you try to look for mask or hand sanitizer but could not obtain it from offline or online store? Yes, this happened due to people’s fear that resulted in panic buying. However, don’t worry, just like what has been told by our President Jokowi that government has ensured enough supplies are available and therefore panic buying is not needed. You could check our President’s full statement from here.
So, don’t panic but stay safe and healthy, Moduers!