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Coronavirus couldn’t come at a worst time for ASX investors

Brendon Lau

There’s never a good time for a virus pandemic, but the spreading coronavirus threat couldn’t come at a worst time for local investors.

The S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is poised to stumble at the open this morning as the SARS-like virus spreads to more countries and is starting to put the brakes on China’s economy.

There are reports of at least 80 deaths and nearly 3,000 reported cases of the from the deadly respiratory disease. There are five known cases here in Australia.

Coronavirus spreading

The Chinese government is extending the Chinese New Year holiday by another three days to February 2 (not the way I would like to take a longer holiday) and blocked all domestic and international tours from operating in an effort to contain the outbreak.

In an added blow to the Australian economy, thousands of Chinese tourists who have booked tours to our country were forced to cancel as the ban is expected to lasts for several weeks, according to the Australian Financial Review.

Multiple headwinds

The potential outbreak of the illness comes at a time when our economy is feeling the impact of the devastating bushfires.

What’s more, the ASX and other global indices are trading near record highs. This leaves extra room for stocks to tumble before bargain hunters jump back in.

The stocks that have come under pressure from the coronavirus are linked to tourism. This includes the Qantas Airways Limited (ASX: QAN) share price and Sydney Airport Holdings Pty Ltd (ASX: SYD) share price.

Stocks infected by the virus

But the fallout won’t stop there. Miners like BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) will likely be in the firing line as commodity prices come under pressure from worries about the slowing Chinese economy as the country goes into lock-down.

So far, there are few signs of panic outside of China. But if fear of catching the disease manifests itself in Australia, consumers might stop going out and spending. That will be bad news for retailers like Wesfarmers Ltd (ASX: WES) and JB Hi-Fi Limited (ASX: JBH), just to name a few.

So far, the sector have been performing well with reports that the Amazon-led digital disruption is waning and the withdrawal of Kaufland from our shores.

Safe-havens on the ASX

However, this will only mark the beginning of the meltdown if worries of a pandemic takes hold. There will be very few spots on the ASX that won’t suffer a sell-off.

On the flipside, gold stocks like Newcrest Mining Limited (ASX: NCM) and Evolution Mining Ltd (ASX: EVN) could be one of the few bright spots as investors seek shelter in the precious metal.

Utilities may also benefit as their earnings are relatively unaffected by a pandemic.

The post Coronavirus couldn’t come at a worst time for ASX investors appeared first on Motley Fool Australia.

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. 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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020