Investing

Beyond Rising Deaths, Wuhan Coronavirus Already Hits China, US, Global Economies

Jon C. Ogg

Published: January 25, 2020 2:35 pm

Last Updated: August 19, 2021 1:01 pm

The most recent coronavirus outbreak that originated in Wuhan in the Hubei province of China has become more deadly and is much less contained than global health officials would have hoped. The death toll has risen to over 40 out of a most recent report of more than 1,300 who have caught the virus. With Wuhan and surrounding cities closed off, there are already rippling effects being felt. The United States has organized a charter flight removal for U.S. citizens who are in Wuhan, a city of about 11 million people that is a major transportation hub inside China, and other nations are pursuing the same strategy.

The loss of life and suffering from illness is always the worst part of any outbreaks, epidemics and pandemics. There is also an economic case that has to be considered in a global economy where a virus moves from one nation to others and begins to shut down parts of local economies and when it begins impacting other nations.

One issue which is going to complicate the impact of the rapid spreading of coronavirus outbreak in China is that the timing of the wider spreading virus was at the start of Chinese New Year, which coincidentally happens to be the Year of the Rat. The Lunar New Year was already expected to close much of China for the week ahead. Now the coronavirus has already hurt public events and ceremonies, with many events having just been cancelled. China has even temporarily closed some 70,000 movie theaters to help curb the spread of the coronavirus.

Before considering how outbreaks turn into epidemics and then into pandemics, the newest coronavirus outbreak is far from the first such case in the modern era. There have been multiple Ebola scares in the last few years alone coming out of Africa. A cholera outbreak in Yemen, swine flu in India, and other outbreaks have been far more deadly as of this time. There have also been multiple others such as swine flue and avian flu that have been great concerns and which have been devastating to animal populations. And SARS, which was reported to be less than 1,000 deaths back in 2003, was perhaps the most memorable of the outbreaks in Asia as one of the first modern era global scares.

There is no simple way to try to minimize or discount deadly viruses and other outbreaks. One issue of relevance to consider is that there are thousands of deaths per year in the United States alone that come from each flu season that are tied to influenza and pneumonia that occur. The U.S. Centers for Disease Control and Prevention (CDC) has already estimated that the 2019/20 flu season has seen 15 million to 21 million cases of the flu through just January 18, 2020 — with 140,000 to 250,000 hospitalizations and an estimate of 8,200 to 20,000 flu-related deaths. As with most illnesses, the mortality rates are generally much higher among those who are infants, the elderly, those with cardiopulmonary conditions and those with compromised immune systems.

China has halted almost all public transit in and out of Wuhan and the surrounding areas in an effort to contain the coronavirus from spreading even more than it has. On top of the isolated cases in the United States, confirmed cases have also been reported in Vietnam, Thailand, Nepal, South Korea, Japan, Singapore, France, Australia, Taiwan and in the territories of Hong Kong and Macau.

At this stage, it may seem too soon and too difficult to try to calculate the economic impact in China, the U.S. and globally. Most pandemic scares and other geopolitical scares usually come with only short-term economic and market impacts. What is not impossible to see right now is that there has already been billions and billions of lost market capitalization rates in dollars among just some of the the top Chinese companies listed in America and in the value of U.S. companies which have direct exposure to Wuhan and other closures or curtailing of operations around China.

General Motors Co. (NYSE: GM) has a large manufacturing facility in Wuhan, as do other global auto-makers. With a 1.6% loss to $34.31 on Friday, GM lost about $750 million in market cap. Anheuser-Busch InBev SA (NYSE: BUD) has a large brewing facility in Wuhan, which was its first in China. The ADSs of AB/InBev fell 0.66% to $77.74 on Friday for a loss of close to $1 billion in market capitalization. Other U.S. and Western businesses are halting their or curtailing their operations locally or around China.

The Walt Disney Company (NYSE: DIS) announced that it was closing its Disneyland and Disneytown parks in Shanghai. Its shares slid 1.5% to $140.08 on Friday, and while that’s not the end of a run it is a loss of $3.8 billion in market capitalization. That also represents the lowest closing price going back to last November before its shares jumped from about $138.00 to $to $147.00.

McDonald’s Corporation (NYSE: MCD) has announced that it was closing its restaurant locations in Wuhan and surrounding cities where transportation has been hated. Its shares lost 1% to close at $211.24 on Friday, a loss of about $1.6 billion in market cap. Starbucks Corporation (NASDAQ: SBUX) has also reportedly closed an unspecified number of stores in China. The 1.8% drop to $92.03 on Friday was close to a $2 billion loss in its market capitalization.

The U.S. air carriers are even taking a hit. United Airlines Holdings, Inc. (NYSE: UAL) saw a 3.5% price drop on Friday to $81.90. American Airlines Group Inc. (NASDAQ: AAL) fell 4% to $27.64, with rival Delta Airlines Inc. (NYSE: DAL) falling the least of the big three with a 2.4% drop to $58.81 on Friday. All three of the majors have made allowances for schedule changes for flights in and out of China.

There are many other companies in major economic sectors which have been and will be affected by the most recent coronavirus outbreak.

Yum China Holdings, Inc. (NYSE: YUMC) saw its shares fall from almost $50.00 at the end of the prior week down to $44.25 by this week’s close. Yum China has closed some KFC and Pizza Hut stories in Wuhan. YUM! Brands, Inc. (NYSE: YUM), which collects a royalty from its former subsidiary, saw its shares down almost 1% at $104.98 on Friday.

Luckin Coffee Inc. (NASDAQ: LK), the recent hot IPO that is dubbed ‘the Starbucks of China’ saw its shares drop over 8% to $40.83 on Friday alone. That is down from about $50 just the week before. By losing close to $20% of its value from the prior week, that’s a market cap of $2.1 billion loss from its recent peak.

Melco Resorts & Entertainment Limited (NASDAQ: MLCO), with its main resorts and casinos in Macau, was a standout on Friday with a gain of 3-cents to $21.24, but this was trading at $25.00 just the week earlier.

China Life Insurance Company Ltd. (NYSE: LFC) is worth $115 billion even after losing 1.6% on Friday and having lost close to 8.4% from the prior week’s closing bell. That’s roughly a loss of $10 billion in market cap for the week.

New Oriental Education & Technology Group Inc. (NYSE: EDU) saw a 3.4% drop to $124.61 on Friday, but the top Chinese education company had been above $135.00 just the prior week. TAL Education Group (NASDAQ: TAL) fell 3.6% to $46.68 on Friday and that is down from $54.00 just the prior week. That’s a combined $1.6 billion or so in market cap losses just on Friday, and even greater for the whole week.

Huazhu Group Limited (NASDAQ: HTHT), a hotel operator in China, saw a 2.5% drop to $32.31 on Friday, but this was down from above $39.00 just a week earlier. That’s close to $2 billion in market cap lost in this week.

Trip.com Group Limited (NASDAQ: TCOM), the leader in online travel (including Ctrip.com), saw its shares drop by 6.9% to $31.90 on Friday alone, and this was a $39.00 stock just the week before. The company has allowed for expanded cancellations in hotels. That’s a loss of about $1.3 billion in market just on Friday and a weekly loss of closer to 44.5 billion in lost market cap.

China Southern Airlines Company Limited (NYSE: ZNH) saw its ADSs fall 2.5% to $29.59 on Friday alone, but the loss for the week was more than 13% and that translates to over $1 billion in losses to the current $9.9 billion level. China Eastern Airlines Corporation Limited (NYSE: CEA) saw its ADSs fall 1.4% to $24.09 on Friday, but that down over 12% for the week for a total weekly loss of more than $1 billion in market capitalization.

While there are actually some winners to consider here, it’s important to consider just what has been happening and what the outlook is for the global picture between the U.S. and China alone. China’s look at 2019 GDP showed annual growth of 6.1%, but it was decelerating into the end of 2019 ahead of China signing its phase-one trade pact with the United States. The IMF recently down-ticked global growth for 2020, but that was before considering any impact from a pandemic or epidemic scare was even large enough to try to factor into models. And GDP growth in the United States is barely expected to be 2% in the fourth quarter of 2019 — with most economists still expecting a relatively slow growth phase in 2020.

Losses in market capitalization are definitely not the same as true economic costs against the broader economy. That said, it counts against the wealth of their shareholders and businesses shutting down or curtailing operations can have a direct impact on wages, consumer spending, transportation, and employment trends. That can all add up into the billions and billions of dollars of real economic impact when you consider the size of the U.S. and Chinese economies.

As with almost all pandemic scares and other national and global issues, there are always some speculative stocks that manage to see their shares rise massively. Due to the size of many of these companies being under a $50 million or $100 million basic size threshold, some of the companies have been overlooked or omitted – and if history repeats itself many of the companies that see huge surges from related news often come back to earth.

Lakeland Industries, Inc. (NASDAQ: LAKE) is not a biotech, but it occasionally gets to play tag-team when there are biotech movers or biohazard situations around major diseases and industrial waste issues. After all, it makes self-contained industrial protective clothing and containment suits for hazmat and all sorts of applications. Lakeland’s share price jumped by just over 25% to $13.77 on Tuesday but even a 5% gain on Friday made for a $13.74 closing price. This was just at $10.97 as of the prior week’s close and its new market cap is just $110 million.

Allied Healthcare Products, Inc. (NASDAQ: AHPI) saw its shares surge 93% to $2.90 on Friday, but it barely has an $11 million market cap and it only just recently regained Nasdaq listing compliance. Among its breathing and respiratory products are facemasks and other products.

Alpha Pro Tech, Ltd. (NYSE: APT) makes masks and disposable protective apparel and its shares rose almost 18% to $6.00 on Friday to end with a $78 million market cap. That’s a 71% gain from the $3.50 share price the prior week, and the more than 26 million shares that traded this last week as a whole (more than 6.5 million average each day) is against what had been typical trading volume 10,000 to 20,000 shares before that.

BioCryst Pharmaceuticals, Inc. (NASDAQ: BCRX) managed to slide back from highs earlier in the week with a 6% drop to $2.81 on Friday, but the $2.75 price from the prior week rose as much as $3.35 earlier in the week. BioCryst has a $432 million market cap and its galidesivir is being tested in Phase 1 studies for multiple viruses that include coronaviruses.

Novavax, Inc. (NASDAQ: NVAX) often sees its shares surge around global health and pandemic scares. While it rose not even 2% to $7.80 on Friday, this $250 million market cap stock was trading at less than $6.00 a week earlier.

Moderna, Inc. (NASDAQ: MRNA), which was the largest biotech IPO in America, closed down 1.6% at $21.12 on Friday with a market cap of $7 billion. This company’s stock rose to as much as $23.00 after the Coalition for Epidemic Preparedness Innovations (CEPI) gave funding to accelerate its work on a coronavirus vaccine.

Cerus Corporation (NASDAQ: CERS) is targeting the MERS coronavirus and is exploring to adapt its treatment to the current Wuhan strain. Cerus closed up just 2% at $4.57 on Friday, with a $650 million market cap, but that is up from $4.07 the prior week.

Co-Diagnostics, Inc. (NASDAQ: CODX) fell 7% to $1.88 on Friday with barely a $32 million market cap, but that was up more than 50% from earlier in the week. It may have been higher except that it sold shares to raise capital at a deep discount in a share offering. The company is preparing a conronavirus test.

Vir Biotechnology, Inc. (NASDAQ: VIR) saw its shares rise 17.5% to $19.95 on Friday, impressive enough for a $2.3 billion market cap, but that is up 23% from its lows of the week. The company has an antibody for another coronavirus strain and management is said to be testing to determine if it is effective against this Wuhan strain.

Inovio Pharmaceuticals, Inc. (NASDAQ: INO) closed up 10% at $4.24 with a $424 million market cap on Friday, but that’s up a total of more than 28% from the close of the prior week. Inovio has been selected by the Coalition for Epidemic Preparedness Innovations (CEPI) with a grant of up to $9 million to develop a vaccine against the recently emerged strain of coronavirus.

NanoViricides, Inc. (NASDAQ: NNVC) saw a whopping 54.5% gain on Friday alone but it’s still just a $32 million market cap. This stock rose over 150% in the last week despite having closed on a $8.6 million public stock offering at just $3.00 per share. The company is targeting nano-medicines targeting swine flu and avian flu, as well as Dengue and Ebola.

An image from the CIA World Factbook shows a map of China to show its positioning in China and where it is in relation to Beijing, Shanghai, Shenzen and Hong Kong.

Source: CIA World Factbook