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Coronavirus Spooks Global Markets: Winners and Losers

Zacks Equity Research

China’s administration has reported 18 fatalities and more than 600 affected by coronavirus so far. As per the World Health Organization, China has taken the “unprecedented” step of locking down Wuhan, the city of origin, and Huanggang. Authorities are making efforts to prevent a pandemic by locking down nearly 18 million people.

However, the virus has flu-like symptoms and jumped national borders as new cases from Singapore and Vietnam are being reported.

Losers Amid Festive Rush

Chinese Lunar New Year celebration begins this weekend, many people are gearing up to travel across the globe and this is exaggerating the fear of the virus spreading further. With quarantines on two cities already announced and fears of more to follow, a dent in spending on travel and leisure during this holiday seems inevitable.

Especially in China, Wuhan is a key transport hub on the Yangtze River, for goods moving from the interior to the coast, as well as for north-south commercial traffic.

The coronavirus scare is also trickling down to the oil market. In fact, a forecast of a market surplus from the International Energy Agency and drop in demand has weighed heavily on crude prices. On Jan 23, Brent crude ended 2.1% lower at $63.21, while U.S. crude shed 2.8%, to close at $56.74.

On the other hand, shares of luxury goods companies were also affected as these were relying on spending by Chinese tourists. Shares of The Estee Lauder Companies Inc. EL and LVMH Moet Hennessy - Louis Vuitton, Societe Europeenne LVMUY fell 1.8% and 1.2%, respectively.

Fundamentals of Transport Helped Stocks Gain

Transportation and hotel companies with presence in China had been declining since the outspread of coronavirus was reported on Jan 20. 

Airline stocks were deeply impacted as evident from the 5.4%, 4.1% and 4.4% loss in share prices of United Airlines Holdings, Inc. UAL, Delta Air Lines, Inc. DAL and American Airlines Group Inc. AAL, respectively, at close on Jan 21. But speculation that pushed stocks lower has been checked toward the end of the week by strong quarterly earnings reports and fundamentals. A strong economy, low unemployment and increased consumer spending acted as tailwinds for the industry.

Similarly, shares of cruise operator Royal Caribbean Cruises Ltd. RCL fell 4.7% on Jan 21. The company had generated nearly 9% of its total revenues over the last 12 months from China.

Winners

With the death toll rising from coronavirus and the virus spreading out of China, health care companies are trying to make the most by taking part in finding a vaccine, or identifying patients with the new strain. This has helped them gain momentum, which might continue for months now. 

Moderna, Inc. MRNA, a Zacks Rank #1 (Strong Buy) company, had also received new funding from the Coalition for Epidemic Preparedness Innovations (CEPI) earlier to accelerate its work on a coronavirus vaccine. You can see the complete list of today’s Zacks #1 Rank stocks here.

One of the top gainers from the coronavirus fever was Inovio Pharmaceuticals, Inc. INO. This Zacks Rank #3 (Hold) company’s shares closed 11.6% higher after it reported that it was awarded a grant of up to $9 million by CEPI on Jan 23 to develop a vaccine for the new strain of coronavirus, 2019-nCoV.

Co-Diagnostics, Inc. CODX, a Zacks Rank #2 (Buy) company, announced on the same day that it has “completed principle design work” for a test to screen for 2019-nCoV.

Rising fatalities and coronavirus cases that are being reported across the border have impacted the markets globally. This is clouding investors’ sentiment and spurring demand for safe-haven assets like gold. On Jan 23, spot gold price was up 0.4% at $1,564.13 per ounce on Jan 23, while U.S. gold futures settled up 0.6% at $1,565.40 per ounce.

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United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
 
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
 
Inovio Pharmaceuticals, Inc. (INO) : Free Stock Analysis Report
 
Moderna, Inc. (MRNA) : Free Stock Analysis Report
 
Co-Diagnostics, Inc. (CODX) : Free Stock Analysis Report
 
LVMH-Moet Hennessy Louis Vuitton SA (LVMUY) : Free Stock Analysis Report
 
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