Coronavirus fears are gripping markets and sending ASX shares tumbling. The ASX Ltd (ASX: ASX) share price is down 6.54% this month but is faring better than many others. But do you really know what drives the exchange and how COVID-19 could impact it?
Why coronavirus is hitting the ASX Ltd share price
First of all, it’s important to recognise that coronavirus fears are hitting almost all ASX shares. Apart from ASX supermarket shares that are benefitting from a surge in sales, it’s hard to find positives right now. But amidst the large sell-offs, the ASX Ltd share price has only fallen 6.54%.
The ASX makes money in several ways and could benefit from these diversified earnings streams. The group provides a service for companies to list and raise capital, makes a commission on the execution of ASX-listed share trades and by providing derivatives markets.
Future growth could come from either more ASX-listed companies or new product development. Despite COVID-19 fears, the actual composition of the ASX hasn’t changed much. That’s not to say it can’t in the future, but just that there will be a lag unlike the immediate impact on some ASX 200 shares.
Should you buy into ASX Ltd right now?
I personally don’t think the ASX Ltd share price is in the buy zone just yet. I would expect to see fewer IPOs with equity markets being as choppy as they are. That means less potential revenue for ASX Ltd in 2020, or at least until this pandemic is under control. While I wouldn’t consider it an appropriate hedge right now, it may not be the worst share to buy.
That’s not to say that there aren’t buying opportunities on the ASX right now. Even if they plummet, markets will recover and trend upwards in the long-term. Understanding and respecting that is the key to a successful investment strategy for decades to come.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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