Investing

Billions of Dollars Wiped Out in Major Stocks With Coronavirus Exposure

As the spread of the coronavirus has increased, with more countries now having patients and higher numbers of cases and deaths in China, the economic impact is being felt even in many areas where the exposure might be limited. It is not unusual for stocks to sell off when there are major illness outbreaks or other global scares, but this is one of those situations when the current consensus is that things are more likely to get worse before they get better.

What has happened in China already is having a severe impact. Wuhan, the city of over 11 million people where the coronavirus outbreak began, is still shut down as far as transportation in or out. Hong Kong was reported to be restricting access to anyone who had been to Wuhan in the past two weeks. President Xi called it a grave situation and has limited travel out of China by large groups. Airlines have cut flights and made certain allowances for cancellations or flight changes in affected areas.

It gets even worse. Some schools have shut down beyond the New Year celebration times. Many retailers have closed or curtailed operations locally in China, with Wuhan targeted first, and making plans if other cities become issues. Large crowd-based venues such as theme parks, movie theaters and Lunar New Year gatherings have been shut, and the Chinese people themselves are just not traveling as they may have normally. Macau visits are ready down sharply.

24/7 Wall St. has viewed a direct selling impact on many specific industries in China and in U.S. companies with large exposure to Wuhan and to the broader China and Asia-Pacific region.

Melco Resorts & Entertainment Ltd. (NASDAQ: MLCO) shares were down 4.6% at $20.26 on Monday due to its dominance from Macau, and that was a $25 stock less than two weeks ago. Las Vegas Sands Corp. (NYSE: LVS) also operates in Macau, and its shares were down 6% to $63.76, after having been at $74 before the coronavirus news.

Several U.S. and Western companies with large exposure are also feeling the bite of the coronavirus. General Motors Co. (NYSE: GM) has a large manufacturing facility in Wuhan, as do other global automakers. With a 1.6% loss to $34.31 on Friday, GM lost about $750 million in market cap, and its shares were down another 2.2% at $33.54 on Monday. Anheuser-Busch InBev S.A. (NYSE: BUD) has a large brewing facility in Wuhan, its first in China. Its American depositary shares (ADSs) fell 0.66% to $77.74 on Friday for a loss of close to $1 billion in market capitalization. Its stock was down almost 3% at $75.50 on Monday.

Walt Disney Co. (NYSE: DIS) announced that it was closing its Disneyland and Disneytown parks in Shanghai, and any movie theater ban is rarely good for one of the top filmmakers. Its shares slid 1.5% to $140.08 on Friday, and while that’s not the end of a run, it was already 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 to $147. Disney stock was down another 2.75% at $136.25 on Monday.

There is a direct impact on restaurant sales as well. Some have shut locations and eaters are staying home. McDonald’s Corp. (NYSE: MCD) has announced that it would close its restaurant locations in Wuhan and surrounding cities where transportation has been halted. Its shares lost 1% to close at $211.24 on Friday, a loss of about $1.6 billion in market cap. McDonald’s was down another 0.5% at $210.26 on Monday. Starbucks Corp. (NASDAQ: SBUX) also reportedly closed an unspecified number of stores in China, and the 1.8% drop to $92.03 a share as of last Friday represented close to a $2 billion loss in its market capitalization. It saw an even larger drop of 3.3% to $89.00 on Monday.

Yum China Holdings Inc. (NYSE: YUMC) saw its shares fall from almost $50 at the end of the prior week to $44.25 by this past week’s close. Yum China has closed some KFC and Pizza Hut stores in Wuhan, and others can be closed if necessary. Yum China was down another 4.3% at $42.33 on Monday. Yum! Brands Inc. (NYSE: YUM), which collects a royalty from its former subsidiary, saw its shares down almost 1% at $104.98 on Friday and then another 0.6% drop to $104.35 on Monday.

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, and its shares were down another 6.4% to $38.23 on Monday. 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 loss of $2.1 billion from its recent peak.