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The S&P/ASX 200 dropped 0.4% below its previous close and settled at 7,022.6 on Friday, 07 February 2020. What fell alongside the index was the S&P/ASX 200 Consumer Discretionary (Sector) by 0.52% and settled at 2,820.4 taking a place amongst the top three ASX index with the most decline, by end of the day.
Likewise, in the beginning of the week, the S&P/ASX 200 tumbled 1.36% below its previous close and settled at 6,923.3 on Monday and remained almost flat with an increase of 0.37% on Tuesday and closed at 6,948.7.
The S&P/ASX 200 Consumer Discretionary (Sector) rose for three consecutive days starting from Tuesday, when the index closed at 2795.69 points, till Thursday reaching 2834.98 points.
The rise in the index can be one of the many effects of the decision made by RBA with respect to the cash rate to remain unaffected at 0.75% on Tuesday.
One reason for the turbulent trend in the market these days might be the novel coronavirus outbreak in China and now spreading across several countries across the globe. Travel, entertainment, casino and gaming companies have taken a major hit due to the travel advisories and bans imposed by the authorities.
As there seem no sight of decrease in the number of infected cases and deaths by the virus, the ban and advisories are implied to remain in place.
With the fall in the casino and tourism shares, news in the market surfaced regarding the impact of the prevailing coronavirus on the travel and tourism players as well as casino operators.
It is a widely accepted truth that the coronavirus has taken a toll over the travel and tourism and related industry with travel bans been placed by countries to China as well as the lockdown of travel facilities in the country.
Amidst all the prevalent risks, on Friday’s trade, stocks like
- Corporate Travel Management Limited (ASX:CTD) fell by 1.116 %,
- The Star Entertainment Group Limited (ASX:SGR) fell by 1.188 %, and
- SkyCity Entertainment Group Limited (ASX:SKC) plunged by 0.855%.
However, during the day’s trade on 07 February 2020, Crown Resorts Limited (ASX:CWN) remained unchanged and had settled at a price of $11.610 with a decrease of 0.77% on 06 February 2020, Thursday.
On Monday’s trade, all these stocks witnessed a significant fall due to ban on Chinese travellers entering the country from 1 February 2020.
The charm for tourism and entertainment in Australia looked like shrinking after Monday’s trade, primarily hit by coronavirus worries and the travel ban to and from China.
Looking at the ups and downs in the stock prices within a week’s time; the market still remains uncertain, especially for the casino and tourism players. The sharp decrease in the share prices left the investors in the zone of worries.
Even the RBA, in its February 2020 meeting held on Tuesday mentioned about the weightage of the Coronavirus outbreak and bushfires on the nation’s growth temporarily.
Although the Chinese Government believes that the disease can be tamed, yet the situation in China keeps worsening day by day with the increasing number of infected cases and deaths across various provinces of China as well as other countries.
The WHO has confirmed 638 deaths due to the disease and there are currently 31,420 confirmed cases of coronavirus across the globe, out of which 31,211 cases have been reported within mainland China. These increasing number of cases have been reported from around 25 countries across the globe as on 07 January 2020.
On the other hand, 1,659 cases have recovered from the disease, which includes the greatest number of cases 1,630 from China alone, followed by 4 from Japan.
Bounded by the unsolicited impact of the coronavirus on the international economy, global investors are in the bewilderment of making the right choices for their investment.
Coronavirus being declared a global health emergency by the WHO, travel bans and globally issued advisories, the increasing number of deaths and mounting infected cases are just some of the many factors that have shaken the global economy, especially Chinese economy, as well as markets.
The Australian tourism, as well as casino operators, are expected to take hit since the Chinese authorities have restricted travel for parts of the country and may extend these restrictions at short notice while many businesses and tourist sites remain closed, and it's uncertain when normal operations will resume.
Many airlines have temporarily decreased or completely stopped flights to China, while additional travel restrictions can be implemented in a considerably short time. The Department of Foreign Affairs and Trade has advised the travellers to not travel to China and the Australian Government has directed non-essential Australian-based Embassy and Consulate staff, including their dependents to revert to Australia from China posts.
Over the year to September 2019, the Australia continued to see record numbers of international visitors with 8.7 million visitor arrivals (aged 15 years and over), 3% more than the previous year primarily driven by holiday, education and employment travel over the year.
Moreover, the growth in the visitor for the Chinese market was 1%, though spend from China still increased to $12.3 billion representing a 7% growth which can be credited to an increase in education visitors which was up 9%.
The entire tourism sector makes up around 3 per cent of Australia’s GDP and the travel ban along with the likely decline in the number of tourists from China would not be a favourable thing.
In relation to this, Flight Centre Travel Group Limited (ASX: FLT) is of the view that its early 2H travel patterns are likely to be affected by coronavirus, especially in Asia and the impact might create difficulty for the company to attain FY2020 guidance.
FLT has been in continuous motion to monitor the impacts of coronavirus on its Greater China and Singapore corporate travel businesses in the near-term and its potential impacts on broader leisure and corporate travel patterns in the upcoming months, which are traditionally the year’s peak booking periods.
Even the FLT stock reduced by 2.382% on 07 February 2020 and settled at a price of $39.750, with a market capitalisation of $ 4.12 billion. In the last one month, the stock has reduced by 8.18% till 06 February 2020.
Bottomline
The alarming situation worldwide due to the amplifying coronavirus cases has been declared as global health emergency and the international tourists from mainland China to Australia have reverted their plans to visit Australia. Undoubtedly, the travel ban from China could take a toll on the various sectors of the Australian economy as can be seen by the market performance on 7 February 2020.
