U.S.-Listed China Stocks Under Pressure As Coronavirus Concerns Deepen

The deadly virus is causing China stocks to fall this week, as U.S.-listed companies such as Alibaba and Huazhu feel the sting of a nervous market.

Jan. 26, 2020

As the SARs-like coronavirus causes havoc in China, already claiming a reported 26 lives, the stock markets have begun to react to the outbreak, with a number of Chinese businesses seeing their stock price plummet this week.

What sector is the worst affected?

The worst-hit in China is currently the travel industry, as major travel group, Trip.com (NASDAQ: TCOM) was forced to waive all cancellation fees for trips to affected areas, including the cities of Huanggang and Wuhan. The decision made this week caused the company’s stock to drop more than 8% on Tuesday, with a steady decline continuing throughout the week. Local authorities in the two cities of a collective 18 million people have even canceled their hugely popular Lunar New Year celebrations amid fears that it would only accelerate the spread of the virus. 

Hotel chain Huazhu Group (NASDAQ: HTHT) also saw its stock drop almost 11% on Tuesday, with further declines on Wednesday and Thursday. The fall comes as investors fear that further unrest caused by the virus will almost certainly lead to a reduction in bookings and losses across the hospitality sector as a whole. 

As reports of the virus crop up all across Asia, it’s not just travel stocks that are feeling the sting. Casino stocks, specifically those based in the Macau region, have also been forced to cancel New Year festivities, a time of year where they expect to experience a boost in profits. Shares of Las Vegas Sands Corp (NYSE: LVS) fell 6% this week, as 62% of its revenue from 2019 came from Macau. Wynn Resorts (NASDAQ: WYNN), which generates 75% of its revenue in the region, also fell more than 6% amid fears of the virus. Wynn’s earnings report is expected in the coming weeks, where analysts expect them to beat on earnings, but this could change following recent events.

Travel is not the only affected sector

All across China, stocks are coming under pressure as the crisis gripping the country deepens. As lockdowns spread across the world’s second-largest economy, product-heavy businesses such as Luckin Coffee (NASDAQ: LK) are also affected. The stock managed to recover losses made earlier in the week but should concern over the virus continue, it may drop further. 

Alibaba (NYSE: BABA) also saw its stock fall over the past week as lockdowns begin to affect the e-commerce giant’s supply chains in its home market. 

Should investors be concerned about the coronavirus?

Despite health officials in China putting millions of people on lockdown to contain the outbreak, the World Health Organization has declared that it is ‘a bit too early’ to declare a global health emergency. 

The S&P 500 (NYSEARCA: VOO) actually rose on Thursday following the reports, while the Nasdaq eked out a record closing high, helped in part by the news, as well as a late rally from streaming giant Netflix (NASDAQ: NFLX).

The virus certainly gives cause for concern, as seen on the market yesterday, where six of the eleven major sectors in the S&P 500 closed in the red. Investors will also remember the $7 billion that the SARs virus cost the U.S. economy back in 2003 and 2004. 

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.