ASX Sinks 1.4% amid Aggravating Concerns over Coronavirus Outbreak

Experts opine that after bushfires, the coronavirus outbreak might hit the Australian economy hard, particularly inflicting suffering on the commodities and travel and tourism sectors, that are increasingly exposed to the epicentre of the virus, China.

The virus has already taken China’s death toll to 360 people, spreading to over 24 countries since its outbreak. To deal with possible repercussions of the virus, Australia has started evacuating its citizens in China to an immigration detention centre.

In an effort to contain the spread of the virus, the Australian PM, Mr Scott Morrison has banned the arrivals from China, discarding tourism and education sectors into a turmoil, possibly disrupting trade. Both tourism and university sectors contribute a significant portion to the nation’s GDP each year, with over 200k Chinese students and more than 1 million Chinese tourists in Australia.

Market experts anticipate the emergence of coronavirus virus to remain an additional challenge for the Australian economy in the first half of this year, with prevailing downside risks to the nation’s Q1 GDP.

Coronavirus to Smash Australia’s Tourism industry

With the Australian tourism industry being heavily dependent on China, the experts are expecting the travel ban on foreigners from China to rub out 0.2 per cent from the nation’s economic growth.

As per the ABS, more than 1.4 million Chinese visitors visited Australia in 2018-19 for short-term, with China remaining the largest source country of short-term visitor arrivals in the nation. The figure marks an increase of 303 per cent in the number of Chinese visitors since 2008-09.

If the ban remains in force, it can result in a combined loss of about $1 billion every month to the Australian economy, striking a hard blow to the tourism industry.

Moreover, experts believe that the travel ban on China is expected to intensify increased hotel vacancies, cancelled travel bookings, employment freezes and loss of shifts in the nation. The companies whose operations rely heavily on China might shatter if the ban prevails.

The outbreak of the coronavirus has shaken the nation’s tourism and travel industry, with stocks in the related space bearing the losses.

Investors Sell-Off Stocks Exposed to China

In addition to the travel and tourism stocks, investors have started selling off other stocks exposed to China amid growing concerns of a slowdown in the Chinese economy due to virus outbreak.

Two casino groups listed on the ASX, that are largely dependent on high rollers from China, Star Entertainment Group (ASX:SGR) and Crown Resorts Limited (ASX:CWN), fell by 3.59 per cent and 1.62 per cent, respectively on 3^rd February 2020.

Moreover, Treasury Wine Estates Limited (ASX:TWE), which supplies its wine range to the Chinese markets, fell sharply by 4.45 per cent.

The coronavirus outbreak is also weighing heavily on base metal and iron ore demand and thereby prices as the travel bans across the countries have delayed the operations of construction and manufacturing companies in China, imposing threat on the global economic growth.

Stocks involved in the materials and resources sectors are facing the consequences of the coronavirus crisis, plummeting significantly on the ASX.

In fact, energy and metal and mining players suffered considerably on the ASX, as depicted in the below table:

JAT Announced Increased Sales of Lactoferrin in China amid Coronavirus Outbreak

ASX-listed FMCG firm, Jatenergy Limited (ASX:JAT), which develops a range of lactoferrin dairy products, notified in an update on 3^rd February 2020 that it has seen an unprecedented demand in China since December 2019 for its Neurio ranges of dairy products containing lactoferrin.

The sales of Neurio lactoferrin brands amounted to $3.44 million in January 2020, relative to $407,000 in January 2019, reported the Company in the update.

Moreover, the Company informed that the sales of all Neurio products was $9.4 million in the six months ended 31 December 2019. The Company believes that the demand seems to be driven by the emergence of the coronavirus.

The demand for its lactoferrin brands from Chinese distributors is rapidly growing as its orders for February and March have surpassed the levels seen in previous periods. The Company has so far received $2 million worth of orders for February 2020 and orders valuing $1.8 million for March 2020. The figures are considerably high than the levels of $1.09 million and $388.7k seen in February and March 2019, respectively.

In a nutshell, one can note though the coronavirus outbreak is bearing down on ASX-listed mining, resources, metal, energy and tourism sectors, it seems to benefit China-exposed health and wellness products’ suppliers. However, it cannot be disregarded that coronavirus continues to remain a greater menace for the world economy after being declared a global health emergency by the WHO.