The outbreak of the coronavirus poses challenges for China and the rest of the world. Assessing the further course of the disease remains naturally very difficult. What we know: The Chinese government is so critical of the situation that it is taking extremely comprehensive measures to protect its population. It is also clear that the Chinese economy will suffer, at least in the short term.

In addition to impediments to industrial production - the Chinese New Year holidays have been extended for many production facilities - a decline in consumption must also be expected. According to official figures, the outbreak of the SARS virus in spring 2003 depressed Chinese growth by about two percentage points during the outbreak, with the lack of consumption being a major factor. Its importance for the Chinese economy has continued to grow since then.

As the short-term outlook worsens, the risks for the global economy also increase. It was precisely the signals from China that have helped to stabilize the outlook for the global economy since last fall. If these fail to materialize or even reverse, an important pillar of growth would fail to materialize. It should not be forgotten that China's importance to the global economy has increased and is now estimated to be almost three times as high as it was when the SARS virus broke out in 2003. Developments in the Chinese economy have thus become much more relevant for the rest of the world.

Based on these considerations, we have decided to reduce the risks in our portfolios somewhat by reducing emerging market equities. Chinese equities account for 40% of the Asian equity market and 34% of the MSCI Emerging Market Index. With this move, we are also assuming a small underweight for the overall equity allocation compared with the strategic investment allocation.

The extent to which the developments described above will translate into a prolonged cooling off is an open question. There is a danger that the mood of consumers and companies will deteriorate significantly, which would have further consequences. From today's perspective, however, we can also hope for a better scenario. If the spread of the coronavirus could be contained quickly, the effects on the financial markets and the real economy would probably be short-lived - similar to what happened in 2003 when the SARS virus broke out. We will of course monitor further developments and make further adjustments if necessary.