The COVID-19 coronavirus hammered financial markets in February as worsening outbreaks of the virus in South Korea, Japan (where schools have been closed) and in northern Italy drove market volatility to the highest level since December 2018. The surge in new cases of the virus led to further concerns as to the impact of the outbreak on global growth due to disruptions to supply chains and the restrictions to the movement of people, goods and the provision of services around the globe.  Perhaps the most important recent economic data point is China’s Manufacturing Purchasing Managers’ Index (PMI) for February which came in at 40 — the lowest reading since the survey was launched in early 2004.

The major world markets as represented by the MSCI World Index and the S&P 500, continued the decline which commenced in January 2020, with both these indices falling in February by 8.59% and 8.41% respectively.  The UK, European and Asian markets were also weaker.  In the UK, the FTSE 100 was down by 9.88% in local currency terms as were the other indices that we monitor, namely the Small Cap Index which declined by 8.67%, the AIM All Share Index which was down by 8.21% and the Fledgling Index which was down by 10.36%. While our portfolio of investments declined in similar fashion to that of the overall market, it performed a little better, declining by 8.53% during the month which, after allowing for the write back of over provided expenses in January, resulted in a similar decline of 8.53% in the NAV.  We did not trade during the month and received cash from the take-over of Hansteen Holdings which was finalised during the month.  Cash currently comprises 6.6% of the portfolio.