Is it an inflection point for the COVID-19 pandemic?

  • Apr 08, 2020 AEST
  • Team Kalkine
Is it an inflection point for the COVID-19 pandemic?

With people sitting in their homes, cars static at their spots, and airlines and businesses shut, the novel coronavirus pandemic has brought the world to a standstill. It is a scenario no one could have fathomed two months ago.

COVID-19 has affected over 12,00,000 people worldwide, with a total of 72,776 deaths to date. However, the cases rose at a slower pace in the principal centres in the last few days, giving out positive indications to the investors.

On 6 April 2020, The S&P 500 Index closed at 2663 points or 7% higher for the day. While the Dow Jones Industrial Average rallied 7.7%, Nasdaq Composite advanced 7.3% as coronavirus cases increased at a slower pace around the world. In the US, the New York Governor highlighted that the steep curve of deaths from coronavirus is flattening.

Italy reported the slowest rise in new deaths for more than two weeks accompanied by France and Germany, which also posted a reduction in new deaths.

S&P 500 Futures gained 5% while Dow Futures advanced 5.8% on the positive sentiment of signs of the virus being alleviated. This helped in rallying S&P/ASX200 by 4.3% to 5,286 index points which lost around 20% in its value in March 2020.

ALSO READ: Macro Catalysts Driving Volatility in the Australian Share Market

The currency (AUD/USD) gained 1.5% amid a revival in the risk sentiment around the world. Gains in US equity futures and a plunge in the number of deaths from coronavirus lifted investor’s confidence giving a mild rebound to the risky currency AUD.

Let us look at some of the top performers listed on the ASX.

Top industrial and healthcare stocks 

PolyNovo Limited (ASX:PNV), a medical device firm based in Australia, is involved in designing and manufacturing dermal regeneration solutions using its polymer technology which helps treat burns and wounds.

On 7 April, the stock was trading at $1.94, up by 15.8% (4:30 pm AEST) with a market cap of 1.1 billion.

As per a trading update, PNV has no expectations of COVID-19 affecting its business. The sales figure for the March 2020 quarter was about 166% higher at $1.69 million compared to the same quarter last year. The sales figure showed higher growth in the second half of March.

PNV opened six new hospital accounts, including four major hospitals in the US during March with multiple orders from two of these customers already. PNV sales team is using online platforms like Zoom to reach customers due to limited face to face interactions. The firm’s NovoSorb BTM is increasingly being appreciated at a time where hospitals need to manage their times in theatre and ICU bed utilisation.

Sales prediction is expected to move upward but remains uncertain.

Zoono Group Limited (ASX:ZNO) develops and sells antimicrobial products around the world.

On 7 April, the stock was trading at $2.08, up by 1.96% (4:30 pm AEST) with a market cap of 333.1 million. Lumyna Investments Limited ceased to be a substantial holder in the company on 7 April 2020.

On 25 March 2020, Zoono announced the signing of a distribution agreement with Doha, Qatar-based Al Rabban Capital. As part of the deal, initially for five years, Zoono’s products will be distributed in the MENA (Middle East & North Africa) region.

ZNO posted revenue of NZ$15.7 million for the March quarter end. The company also reported that its UK sales jumped to NZ$3.5 million due to significant business in the pipeline with airlines, airports, transport and commercial cleaning companies.

Amid the coronavirus impact, the major challenge ZNO is facing is the influx of orders, majorly online and enquiry for the company’s products from all around the world about the efficacy of its products and technology.

ZNO has increased its production and recruited more staff to cope with the demand lift resulting in costs rising to NZ$5.9 million.

ResMed Inc (ASX:RMD), a medical equipment company, is engaged in the development of better quality medical devices for treating sleep apnoea, chronic obstructive pulmonary disease (COPD) and other respiratory illnesses. Revenue for the firm had increased by 13% YOY to $736.2 million for the quarter ending 31 December 2019.

Biotron Limited (ASX:BIT) is involved in the development of pharmaceuticals to target viral diseases. The company showed that BIT225, Biotron’s lead compound for the treatment of HIV-1, exposes HIV-infected cells that remain in the body even after treating it with the anti-HIV-1 drug. The firm has received R&D tax incentive refund worth $753,026 for antiviral drug development from the Australian Government for FY 2018/2019.

Consumer Staples

The supermarket groups paired up with the broader market with Coles Group Limited (ASX:COL) rallying 2.2% to $16.2, Woolworths Group Limited (ASX:WOW) up by 4.6% to $37.15 and Metcash Limited(ASX:MTS) advancing by 3.8% to $2.97 on 6 April 2020.

Shares of MTS rose by 25.5% while Coles share price was up by 6.3% during the month of March, showing positive performance of the stocks. The share price of WOW fell by 10.5% during the same month.

Shares of Coles and Metcash have been increasing with Woolworths not making a similar jump but better than the benchmark index of S&P 500/ASX 200. The surge in share prices is due to the panic buying behaviour to stock up on supplies amid the fears surrounding the coronavirus pandemic.

Macquarie Wealth Management stated Lockdown due to COVID-19 will lead to positives for supermarkets due to a change in behaviour over a longer-term.

The cost of the goods can increase if the supermarkets are not able to cope up with the demand. Cash flows for the supermarkets are expected to remain robust as there is continuous buying which is essential for their earnings.

Gold Stocks

Some gold stocks are performing quite well of late.

Newcrest Mining Limited (ASX:NCM) closed at $26.05, up by 2.48% on 7 April 2020. The company has moved to Stage 2 farm-in-milestone at the Havieron project making 40% interest in the plan. It has established a Community Support Fund worth $20 million to give support to host communities financially with a focus to increase the availability of medical care and vaccine research to fight COVID-19 impact.

At present, no cases of COVID-19 have been reported at any of its sites. The operations for the company continue, and no change in guidance for FY20 has been announced.

On 7 April 2020, Northern Star Resources (ASX:NST), Australian gold producer, share price advanced to $11.56, up by 7.53%. The company is taking strict measures to trace workers in close contact with the affected employee after a POGO employee tested positive for COVID-19 on 6 April 2020.

With markets clouding with positive sentiments even when volatility is very high, there is an indication that investors are viewing things a bit on the near-term. However, there is huge uncertainty about the route the pandemic will take in the future with serious questions concerning its possible rebirth in China and other countries.


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