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China Zero Covid Policy - The World VIX

VIX is an abbreviation for volatility index that helps anticipate any crisis. This is a familiar trend for people in finance that when VIX goes up the other assets come down as it results in risk appetite reduction.

Now that term is briefly understood, imagining this will not be difficult as China is a focal point of the world economy in terms of output of finished products and input of materials. Even the slightest move in terms of price or volume leads to ripple effects throughout the globe. This is the reason actions by China make it the World economy VIX.

This was very visible in December 2019 when the country detected its first official covid case. Post, the policy of lockdown the volatility just spiked to unbelievable levels resulting in not only the impact tampering domestic economy but also the world throughout.

And in the present times, again due to the Zero Covid policy the slower growth is already sending similar impacts but as of now at a lower scale. This might get bigger soon and again impact in large proportions resulting in VIX spiking but the only help it will provide this time is to reduce the commodities prices that have been scaling new highs. But the reduction might be short-lived as the reversal or liquidity infusion will be anticipated by investors in quick succession.

Though festival season is happening and resulting in such a sentiment on the lower scale there will come a moment of a wild VIX move.


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