Coronavirus fears send tourism and China-focused consumer stocks plunging
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It’s a bleak morning for ASX stocks in the tourism and China-focused sectors.
A contravirus began in the Chinese city of Wuhan and while the city is now in lockdown mode, about 5 million people left beforehand due to the Lunar New Year holiday.
The so-called ‘Coronavirus’ has now spread across China and to 13 other countries.
As at 12pm today, 106 people have died and 2,700 cases have been reported in mainland China. 5 cases have been reported in Australia.
Markets panicked. After a positive start to the year, Australian stocks have retreated with both the ASX 200 and ASX Small Ords falling more than 1 per cent.
Tourism stocks were hit especially hard, with China’s Ministry of Culture and Tourism suspending all tour groups and the sale of flight and hotel packages overseas from yesterday.
By 12pm, of 19 stocks in the tourism sector none were in the green and all but five retreated.
The biggest loser was large cap travel agent Webjet (ASX:WEB) which fell over 10 per cent but many smaller caps were hit too.
|Code||Name||Price (12pm)||% Chg||Volume|
|AQS||Aquis Entertainment Ltd||0.03||+0.00%||160.0k|
|CYQ||Cycliq Group Ltd||0.001||+0.00%||12.0M|
|EBG||Eumundi Group Ltd||0.98||+0.00%||2.1k|
|IDZ||Indoor Skydiving Australia Gro||0.008||+0.00%||59.7k|
|SVH||Silver Heritage Group Ltd||0.01||+0.00%||4.2M|
|VRL||Village Roadshow Ltd||3.98||-1.00%||121.2k|
|RCT||Reef Casino Trust||2.52||-1.18%||4.4k|
|ENN||Elanor Investor Group||2.12||-1.40%||51.7k|
|SLK||SeaLink Travel Group Ltd||4.07||-2.98%||154.2k|
|HLO||Helloworld Travel Ltd||4.47||-3.04%||101.5k|
|EXP||Experience Co Ltd||0.2||-9.09%||818.5k|
|BYI||Beyond International Ltd||0.7||-6.67%||500|
|DNA||Donaco International Ltd||0.08||-4.88%||28.5k|
|SGR||Star Entertainment Grp Ltd/The||4.18||-4.78%||1.5M|
|ATL||Apollo Tourism & Leisure Ltd||0.38||-3.85%||37.3k|
|FLT||Flight Centre Travel Group Ltd||39.96||-3.64%||268.6k|
|EVT||EVENT Hospitality and Entertainment||13||-3.56%||41.7k|
|CWN||Crown Resorts Ltd||11.62||-3.49%||1.5M|
The 30 stocks with a heavy China focus, dominated by daigou shops as well as seafood and infant formula exporters, were still hit but to a lesser extent.
3 stocks gained, the biggest of which is online wine retailer Digital Wine Ventures (ASX:DW8).
But the biggest loser is daigou store AuMake (ASX:AU8) despite being the only company to publicly comment about the crisis as at 12pm.
The company said it was confident it could meet its commitments for the forseeable future.
However it said, without being specific, health and safety procedures had been implemented. Additionally, would continue to assess the impact and update the market accordingly.
The ASX’s other daigou store operator, Mediland Pharm (ASX:MPH) was unchanged this morning.
|DW8||Digital Wine Ventures Ltd||0.0095||+5.56%||22.8M|
|AHF||Australian Dairy Nutritionals||0.1||+1.02%||12.2k|
|ABT||Abundant Produce Ltd||0.07||+0.00%||12.8k|
|AWY||Australian Whisky Holdings Ltd||0.04||+0.00%||150.0k|
|BUG||Buderim Group Ltd||0.25||+0.00%||2.6k|
|EHH||Eagle Health Holdings Ltd||0.12||+0.00%||299.2k|
|HCT||Holista CollTech Ltd||0.08||+0.00%||135.0k|
|HUO||Huon Aquaculture Group Ltd||4.7||+0.00%||14.9k|
|MCA||Murray Cod Australia Ltd||0.15||+0.00%||2.3k|
|MPH||Mediland Pharm Ltd||0.25||+0.00%||4.0k|
|NAM||Namoi Cotton Ltd||0.31||+0.00%||12.0k|
|OGA||Ocean Grown Abalone Ltd||0.13||+0.00%||83.0k|
|SKN||Skin Elements Ltd||0.014||+0.00%||85.5k|
|AU8||AuMake International Ltd||0.09||-19.13%||5.2M|
|FLC||Fluence Corp Ltd||0.41||-4.65%||177.7k|
|LON||Longtable Group Ltd||0.16||-3.12%||9.9k|
|A2M||a2 Milk Co Ltd||15.02||-3.10%||1.6M|
|CLV||Clover Corp Ltd||2.65||-2.21%||92.9k|
|BUB||Bubs Australia Ltd||0.95||-2.05%||1.3M|
|FOD||Food Revolution Group Ltd/The||0.07||-1.43%||131.4k|
|CSS||Clean Seas Seafood Ltd||0.72||-1.37%||35.1k|
|S66||Star Combo Pharma Ltd||0.5||-0.99%||7.3k|
|AVG||Australian Vintage Ltd||0.5||-0.98%||25.2k|
|SM1||Synlait Milk Ltd||8.53||-0.81%||21.6k|
Curiously, bug killer Zoonoo (ASX:ZNO), which has a China focus and is fighting a different flu in China (namely swine flu) is one of today’s few winners on the ASX up 15 per cent.
Market commentators are acknowledging this is a crisis but are saying it’s still too early to see the impact.
deVere Group chief exec Nigel Green declared this to be “the number one threat to financial markets”.
But he advised against short term selling at least for this week.
“The cost and effort of making such a switch means you do not do it lightly, and more evidence is needed that the virus does pose a medium to long term risk to China and the global economy.”
“Investors should monitor the situation with their financial adviser and sit tight at present. But if it is still escalating next week, with much higher casualty rates, a more defensive approach might be necessary.”
Invesco Chief Global Markets Strategist Kristina Hooper had similar advice.
“We believe that investors with longer time horizons may want to stay the course and maintain their current allocations, as history has shown that health scares and their impact on markets are very short-lived,” she said.
Hooper argued the crisis did not appear to be worse than the 2003 SARS (severe acute respiratory syndrome) epidemic. This health crisis plagued Southern China for 6 months and infected over 8,000 people, killing 774.
She said the Chinese government was acting more aggressively to fight the virus than it did back then.
Moreover it was not trying to cover up the crisis like in 2003 when it stifled reporting and tried to block a World Health Organization (WHO) investigation.
As well as this, she argued health care service providers were in a better state than 2003 and the travel restrictions may limit transmission.
But she admitted if China was unsuccessful in containing the virus, there could be some downside to come.
“The market reaction may deepen further if the virus spreads further. The most recent revelation of new infections in China and elsewhere suggests that the market will be faced with further downside risks,” said Hooper.
“But when the coronavirus is successfully contained, we believe the situation should normalise and financial markets are likely to stabilise.”