24/7 Wall St.

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.

As with most health scares, airlines were hit extra hard, particularly the Chinese air carriers. China Southern Airlines Co. Ltd. (NYSE: ZNH) saw its ADSs fall 2.5% to $29.59 on Friday, but the loss for the week was more than 13%, and that translates to over $1 billion in losses to the then-current $9.9 billion level. That was down another 7% on Monday to $27.52. China Eastern Airlines Corp. Ltd.’s (NYSE: CEA) ADSs fell 1.4% to $24.09 on Friday, down over 12% for the last week. Its shares were down another 7% to $22.40 on Monday.

The U.S. air carriers even took a hit as all three majors have made allowances for schedule changes for flights in and out of China. United Airlines Holdings Inc. (NYSE: UAL) saw a 3.5% price drop on Friday to $81.90, with an even larger drop of 4.6% to $78.10 on Monday. American Airlines Group Inc. (NASDAQ: AAL) fell 4.0% to $27.64 on Friday and another 5.1% to $26.25 on Monday. Delta Airlines Inc. (NYSE: DAL) fell the least of the big three, with a 2.4% drop to $58.81 on Friday, but it was down another 3.7% to $56.65 on Monday.

Being a life insurer in a potential pandemic may not be the safest play in finance. China Life Insurance Co. Ltd. (NYSE: LFC) is worth $115 billion, even after losing 1.6% on Friday and losing 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. Its U.S.-listed shares were down another 4.4% to $12.40 on Monday, with a market cap of closer to $111 billion.

If schools are closing or are at risk of closure, it’s bad business for the major educators as well. 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 the prior week. New Oriental was down another 2% at $122.05 on Monday. TAL Education Group (NASDAQ: TAL) fell 3.6% to $46.68 on Friday, and that is down from $54.00 the prior week. It was one of the surprise winners with a 2.4% gain to $47.80 on Monday. Those two companies saw a combined $1.6 billion or so in market cap loss just on Friday, and more than a $2 billion loss over last week.

If travel is down, so is the need for hotels, and hotels are often avoided during health scares. Huazhu Group Ltd. (NASDAQ: HTHT), a hotel operator in China, saw a 2.5% drop to $32.31 on Friday, but this was down from above $39 just a week earlier. That’s close to $2 billion in market cap lost in a week. Huazhu was up 2.3% at $33.05 on Monday

Trip.com Group Ltd. (NASDAQ: TCOM), the leader in online travel (including Ctrip.com), saw its shares drop by 6.9% to $31.90 on Friday, and this was a $39 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 cap just on Friday, and a weekly loss of closer to $4.5 billion. While it was down as low as about $29 on Monday morning, its shares had come back to show a gain of just over 1% to $32.20 in midday trading.

Taking cruises during major health scares is frowned upon. Ships have been the source of many illnesses, without larger public health scares, and passengers might not be as hygienic as they should be when they are in close quarters with a couple thousand other people all touching the same handles and railings. Norwegian Cruise Line Holdings Ltd. (NASDAQ: NCLH) was down 3% at $54.13 on Monday, and that’s down from $59.00 at the start of last week. Carnival Corp. (NYSE: CCL) was down almost 4% at $45.70 on Monday, and that was a $51.00 less than a full week ago. Royal Caribbean Cruises Ltd. (NYSE: RCL) was the hardest hit on Monday with a 6% drop to $118.90, and which is down from $135.00 just about 10 days ago.

Trying to compare losses in market capitalization is definitely not the same as true economic costs against the broader economy. But when you see the outright curtailing of operations and a “let’s stay in” mentality taking hold, it becomes impossible to believe that China’s gross domestic product will not feel an impact if these trends continue (or get worse) over the next few days. This all adds up to a negative impact on wages, sharply lower consumer spending, lower transportation trends, lower overall business trends and so on. Suddenly the multiple billions of dollars of real economic impact will bite into GDP of the massive Chinese economy — and potentially the U.S. economy if the coronavirus becomes a larger concern here.

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