Trading opportunities on the London Stock Exchange amidst the Coronavirus scare

The past month has been a period of turmoil, on multiple fronts on account of the coronavirus outbreak in China. The outbreak which has claimed more than 2700 lives now has put parts of China in virtual lockdown and movement of men and materials to and from the country is severely restricted. Though every precaution has been taken, the virus has managed to spread in other parts of the world as well. Infections have been reported from countries in Europe, Middle east and other East Asian countries and even in the United States of America. With no clear signs of bringing the epidemic under control, trade and commerce across the world have now begun to suffer.

Movement of goods into and out of China have been restricted severely. The country, which is now the second-largest economy in the world, has significant trading relations with almost all geographies. The country is the largest importer of basic commodities like minerals and metals and the largest exporter of semi-finished goods like machinery parts and apparel and accessories. Needless to say, restriction in movement of men and materials is also affecting the economies of countries who have trading relations with China. British companies mainly import machinery and parts from China. The cheap manufacturing base of China provides the perfect backdrop for these companies to become cost-competitive in an increasing price-sensitive international trading environment. The United Kingdom also very recently came out of the European Union. The Union for long has provided a strong manufacturing base to the producers of the country but now this base is not available for the same reasonable costs as before. Brexit, thus, has forced many of these companies to look for alternative supplying countries and China emerges as the most cost-effective alternative.

Several companies in the United Kingdom today have reported that they are now facing severe resource crunch on account of delayed shipments from China. With no immediate alternatives in hand, these companies have now started to issue production and revenue warnings. The situation is also equally worrisome for countries which supply raw materials to China. Inventory has been lying idle in many parts of these countries the with shipment companies refusing to lift them while ships laden with cargo bound for China are waiting outside of Chinese harbours awaiting instructions. Two industries have been battered the most by this coronavirus outbreak. The first is the Global Airline industry, with fewer people travelling amidst scare of being infected from the outbreak. The number of passengers travelling by air has significantly come down. Many of the airline companies have now suspended their flights into and out of China, which at one time used to be some of their most profitable routes, leading to underutilization of resources. The second badly affected industry is the Cruise Liner industry. The recent news of a ship being in quarantine on the shores of Japan and the news of the number of people affected by the virus on the ship is a reminder how dangerous an epidemic of this scale could become in the confined spaces of a cruise liner. There are a growing number of Chinese tourists who are frequenting cruise ships which may have transited through the affected provinces of China in recent times. Vetting each and every such guest is difficult and in the absence of such an exercise, the risk of spreading of the epidemic increases by leaps and bounds.

The scare of the epidemic has started to have its effects on the capital markets across the world as well. On the London Stock Exchange, several companies have been caught in a downward spiral in the past few days after their managements have issued revenue and profit warnings. Stocks of other companies, whose industries are bound to be negatively affected by the scare from the virus are also performing poorly, and their combined impact is having a telling effect on investors at the entire London stock exchange. The most worrisome aspect of the present epidemic is that it is currently difficult to predict how long it will take to contain the spread of the virus. Authorities in China as well as in the rest of the world are in an enhanced state of alertness, but the number of cases culminating into death keeps on mounting.

Despite the scare, however, there are a number of stocks on the London Stock Exchange which have performed well on the same. Most of these companies are either domestically focused companies or their businesses are least affected by the situation in China.

Below are ten companies that have performed well not only in terms of business performance but also in terms of trading on the London Stock Exchange in the past two months. These companies represent decent trading opportunities for investors looking to buy good stocks during these turbulent times.

1. BAE Systems Plc – The stock has given a return of 13.27 per cent in price returns since the beginning of the year 2020.
2. Barratt Developments Plc – The stock has given a return of 8.27 per cent in price returns since the beginning of the year 2020.
3. Berkley Group Holdings Plc – The stock has given a return of 5.86 per cent in price returns since the beginning of the year 2020.
4. Experian Plc– The stock has given a return of 7.75 per cent in price returns since the beginning of the year 2020.
5. Ashtead Group Plc – The stock has given a return of 6.46 per cent in price returns since the beginning of the year 2020.
6. Ferguson Plc – The stock has given a return of 5.25 per cent in price returns since the beginning of the year 2020.
7. Fresnillo Plc – The stock has given a return of 13.6 per cent in price returns since the beginning of the year 2020.
8. National Grid Plc – The stock has given a return of 9.56 per cent in price returns since the beginning of the year 2020.
9. Persimmon Plc - The stock has given a return of 14.46 per cent in price returns since the beginning of the year 2020.
10. Polymetal International Plc - The stock has given a return of 9.90 per cent in price returns since the beginning of the year 2020.

*Note: The above-mentioned stocks are not a recommendation in any sense and past returns are not a guarantee for future returns.