Stock markets around the world were destroyed at the end of last week. This happened amid fears of the emergence of a new type of virus in China that is suppressing the profits of companies from Wuhan to Washington. Quoting USAToday, Monday (01/27/2020), the World Health Organization (WHO) has also established the corona virus as a global health emergency in which the Corona Virus has killed more than 24 people and infected more than 800 people, with a distribution center in Wuhan city in Central China. Suddenly investors were worried about the virus outbreak that began in the city of Wuhan, China.
This was learned from the case of the SARS outbreak, which caused huge losses. Like the Hong Kong stock market which lost around 10 percent in March and April 2003 when the number of new SARS cases was confirmed to be epidemic quickly. At present physical losses due to the Corona virus that not only cause death, fear of illness can cause people to stop traveling, shopping, and eating in restaurants. According to FactSet, China contributed 6 percent of all revenue to S&P 500 companies over the past 12 months, or nearly double that of other countries besides the United States. "This can have far-reaching impacts outside China," said Procter & Gamble CFO Jon Moeller.
US company stocks took a hit because they got business directly from China. For example, the travel and tourism industry. Las Vegas Sands and Wynn Resorts get most of their income from casinos in Macau, on the southern coast of China. Each lost more than 8 percent of the value of the stock last week. The airlines have also been hurt by fears of an outbreak that makes customers not only fly to and from China but also throughout the region. United Airlines' stock value dropped 8.7 percent last week. The United Airline company has about 5.5 percent of the flight capacity allocated for US-China or Hong Kong routes. Analyst Stifel said, the impact of the corona virus does not only occur in China alone. For example, tours in Hawaii which are mostly visited by tourists from China.
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| The average tourist has the highest expenditure and spends 349 US dollars per person per day in 2018. "If Chinese tourists stop traveling, then US hoteliers will be disadvantaged," he said. CoronaVirus Spreads, McDonalds Closes Restaurants in 5 Cities in China Meanwhile, JP Morgan analysts said, European luxury companies in China which get 35 percent of its sales will also lose money. This also does not only occur with transportation companies with retail business orientation. Wuhan is also a major industrial center in China, with steel factories, smartphones and cars. "This virus can increase costs for companies linked to supply chains," said a J.P analyst. Morgan. On the other hand, any sharp reduction in travel will certainly have an impact on oil prices. |
China is the world's biggest driver for oil demand growth, but oil prices fell 2.5 percent last Friday. Meanwhile, profits can be found for companies that have experienced a shift to online shopping. This is considered to help reduce the impact of people trying to move away from the direct purchasing system. In addition, the pharmaceutical sector, especially vaccine manufacturing companies, is expected to surge due to speculation that their sales can get a boost of market optimism. Analysts said Novavax, a company with a market value of 250 million US dollars, was exploring the development of a corona virus vaccine candidate. The value of the company's shares also surged nearly 36 percent in this week. Inovio Pharmaceuticals, which said it received a grant of up to 9 million US dollars to develop a vaccine against a new virus, its share value also rose by almost 29 percent.