As the Greater China region begins to show nascent signs of success in stemming the coronavirus, regional markets have held up better than developed-world markets. With the US and Europe still in panic over the pandemic, we think investors should look at the Chinese experience for guidance.

After three months of battling the coronavirus, it looks like China has started to turn the tide. By mid-March, the number of new COVID-19 cases at the Wuhan epicenter had fallen dramatically. Hong Kong, Taiwan, Singapore and South Korea also appear to be holding up relatively well. In contrast, new cases are rising rapidly in the developed world, where the situation is changing rapidly. Italy is on lockdown and other European countries and the US just starting to impose tougher measures to slow the spread of the virus.

Chinese Stocks Stabilized as US and European Markets Crashed

Market patterns reflected this divergence. While the US market was in free fall last week, Chinese stocks have stabilized. In fact, the MSCI China A Index advanced by 0.3% in US-dollar terms from March 1 through March 12. Over the same period, the MSCI World Index tumbled by 17% and the S&P 500 Index crashed into bear market territory, with a 16% drop.

So why haven’t the Chinese markets fallen more? We think much can be explained by the experience and relative preparedness of the local population for this type of crisis. And, as investors, we’ve also seen markets bounce back quickly from public health crises in the past.

The SARS Playbook—for People and Investors

Back in 2003, southern China, Hong Kong and Taiwan were hit hard by the SARS virus. That epidemic left a lasting and scarring legacy. For example, most office buildings and malls now have hand sanitizers built into the walls. So when the new coronavirus epidemic hit, people knew the drill: face masks and furious handwashing. Concerts were cancelled, and people stayed home and away from restaurants. Many companies—including our firm—quickly shifted into work-from-home mode. These social-distancing and hygiene practices, seared into the population’s mind from 2003, have been largely responsible for containing the virus—beyond anything the government has done.