General, Forex

Weekly Review: 5 markets most affected by the coronavirus

Benjamin Weiss, Friday, 7 February 2020

MKT-6706_WeeklyReview-Coronavirus_blog

As it continues to spread across the globe, the coronavirus takes up more and more of
the headlines in what was otherwise a relatively mild week in the markets. China’s shares fell the most in four years on Monday, and so, instead of the usual highlights, this week we’re focusing on the epidemic and looking at five stocks most affected by the coronavirus. 

Disagree with our picks or think we've missed one out? Let us know. 

China Southern Airlines

After the outbreak sprung from Hubei, China, a primary measure to prevent it spreading was to effectively close off all transport from the city outbound. With international hubs across China, major airports were directly impacted that had knock-on effects to travelers across the world. 

China Southern Airlines is the nation’s largest aviation firm, with over 100,000 employees and a market cap value of around 14.8 billion. A range of international airlines have been impacted, but perhaps none more so than the Chinese giant. 

The firm lost over 23% as its share price plummeted over late January and early February. Although a number of measures have now been taken to limit the outbreak, such as the ten-day construction of a new specialised hospital, implications that firms are out of the woods and the worst days are behind us in terms of the virus are premature. 

When it comes to air travel, a lot of uncertainty still remains. Even if the virus is seemingly being contained, air travel will be the very last thing to fall back into operation as normal. Given the two-week delay on symptoms as well, it might be a while before airlines are declared fit to operate from the worst hit parts of China. This uncertainty will continue to relay across to travelers as they simply avoid booking flights through China for future trips all together until the all-clear is definitely given. 

Therefore, it would not be surprising to see these losses continue over the next few months until operations are back to absolute normal - even then, given the time in advance air travel is booked there may be a further delay until sales are back to normal. 

Luckin Coffee 

Luckin Coffee is a new (ish) company that many people wouldn’t have heard of in the UK, nor Europe. But despite its youth, the combination of ambition and technology has fired it into a tense battle with major beverage firm Starbucks. In China, Starbucks previously had an overwhelming market share, but ever since its inception Luckin has dug away at that monopoly-like market structure. 

READ IT NOW - [Luckin Coffee vs Starbucks: battle of the Baristas]

And now, with the escalation of the coronavirus, Starbucks was last week one of the first big companies to close stores in China. Half of its 6,300 stores in the virus-stricken nation were closed to prevent spreading - inadvertently giving Luckin a foot in the door. 

Luckin’s price ended up falling 8%, with Starbucks only suffering a 4% fall. But the longer-term impact may be far more positive for the firm that recently overtook the US-corporation in terms of number of stores in China. Why? Because the only Luckin stores directly affected by the virus were the ones shut in Wuhan (epicentre of the outbreak), whereas other stores across the country are ‘being closely monitored’ but crucially, remain open.

Coronavirus Luckin

Apple

Despite playing catch-up to the Chinese firm Huawei, Apple still has a large presence in China as one of its largest markets. Therefore, it’s not too surprising that the coronavirus is affecting the Californian firm.

Apple took the decision to close all of its stores across mainland China. It later announced that it was closing its corporate offices and contact centres as well. This has combated the relatively strong earnings report it published, equaling high levels of volatility over the last week or so. If and as the coronavirus continues on its path of destruction, Apple may slowly see its price fall without any boosts that could mitigate the losses.

Coronavirus Apple

Burberry

The fashion industry has been hit hard with the threat of the coronavirus. China operational capacity means factories are often based there to supply global brands their clothes, but for Burberry the impact has been directly on sales rather than supply.

Over a third of stores have been closed in China itself and predictably the number of shoppers in those stores that have remained open has also fallen considerably. Despite being a British company, Burberry’s presence in Asia and specifically China is huge. There are more stores in the Asia Pacific region than Europe, the Middle East, India and Africa combined, and twice as many as the Americas.

Not only have Asian sales gone down, but the firm fully expects sales across ‘popular tourist destinations’ to fall over the coming weeks due to a reduction of Chinese travelers given the air travel restrictions.

Its price has fallen over 17% in the last few weeks after reaching all-time highs, but Burberry is bracing for further losses – which look likely.

Coronavirus Burberry

Inovio Pharmaceuticals

In reality, we could have picked from a number of Pharmaceutical firms. Companies selling masks alone could see revenues increase ten-fold (as seen with NF Energy Savings Corp.), but we’ve picked Inovio as the one to focus on here.

Inovio is a biotech company that is just one of many working to create a cure for the coronavirus. As such, its price made gains of over 100% in the last few weeks, with its graph resembling that of Bitcoin’s rise during that rally in December 2017. This is despite warnings that even if a vaccine is produced, it will be released too late to effectively market and properly capitalise from. It has since cut back into the majority of those gains.

If it did come close to producing a vaccine or any form of medicine to treat symptoms, the subsequent windfall would be huge and its share price would soar simply because it would be the firm to find a cure.

Coronavirus Btc v Inovio

Share article