Investors are on edge as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is in a free fall along with global markets as the coronavirus spreads its tentacles to several countries.
We know the saying about being greedy when others are fearful, but playing a game of chicken with stampeding bears takes guts.
If you are searching for reasons to bite the bullet and press the "buy" button on ASX shares, here are three that could help steel your resolve.
Virus vs. the GFC
The latest plunge in the market is triggered by fears that COVID-19 will be declared a global pandemic. The coronavirus outbreak isn't confined to China and cruise ships anymore as the virus reached the shores of Europe through Italy.
Another major economy, South Korea, reported hundreds of COVID-19 cases in the last few days. Investors are bracing for a big hit to global growth as the illness force cities into lockdown.
But this doesn't change expert predictions of a V-shaped recovery. The spread of the disease may push out the trough but it doesn't negate it. We've seen this during the SARS and MERS outbreaks and there's no new facts that changes this belief.
As frightening as COVID-19 is, it's no GFC as it doesn't pose a systemic risk to markets or economies. This means the effects of the pathogen will be relatively short-lived, in my opinion.
Mortality rate
Everyone is afraid of catching COVID-19, but the fact is 80% of those who get the new bug will get mild flu-like symptoms and recover fully.
What's more, the mortality rate is low. Experts estimate it could be around 2% with the elderly and those with weakened immune systems due to a pre-existing medical issue most at risk.
The problem is that the disease is so infectious (which means lots of people are likely to get it) that the 2% can translate into a large number. The other issue is that the 2% is only an estimate as no one knows for sure how many people really have COVID-19 given that many may not show any symptoms.
Nonetheless, the fact that the masses will make a relatively quick recovery makes the panic sell-off looking overdone.
Dividend deluge meets market meltdown
The timing of the sell-off is also fortuitous, in my view. ASX companies are expected to shed billions in dividend payments over the coming weeks and the sell-off presents a great opportunity to gain a greater share of the payouts.
The fact that record low interest rates are here to stay for the foreseeable future makes this buying opportunity too hard to pass up – assuming you have a longer-term investment horizon.
Let's also not forget that three of the big four banks, being National Australia Bank Ltd. (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) will be reporting results in May.
Dividend strippers will soon be targeting these stocks due to the 45-day rule and that should give these banks a nice support base.
