Coronavirus: Australian share investors brace for impact
The coronavirus outbreak is being felt on the Australian sharemarket but investors are being warned not to panic.
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Share investors have been warned not to panic and make snap trading decisions as a result of the deadly coronavirus spreading from China.
Some travel-related stocks have taken a big hit, but the overall sharemarket dropped less than 1 per cent this week as investors largely shrugged aside the global health emergency.
However, a worsening situation will affect economies, exports and global tourism, so it’s wise to keep an eye on events, share specialists say.
Investment newsletter Marcus Today’s senior market analyst, Chris Conway, said his concerns grew this week after warnings from officials in China – our biggest trading partner – of a sharp drop in its economic growth.
“I think Australian investors are being slightly too complacent,” he said.
“But I would say don’t panic. Don’t go crazy and drop an entire portfolio because not every stock is going to be impacted the same way. But be mindful it could be drawn out.”
Mr Conway said stocks to suffer most from an economic downturn caused by coronavirus included travel and tourism companies, miners and other exporters.
Since mid-January, shares in Corporate Travel have dropped 20 per cent, Helloworld Travel is down 14 per cent, Webjet fell 16 per cent and Flight Centre dropped 10 per cent.
Exporter Treasury Wine Estates shares plunged 25 per cent this week but the main culprit was problems with its US business, with coronavirus concerns adding salt into the wound.
Robo-advisor InvestSMART’s chief market strategist, Evan Lucas, said the old adage “China sneezes and Australia catches a cold” applied, and Fortescue Metals was one of the companies most at risk.
“Ninety-six per cent of its exports go to China and as a pure iron ore play its risk is China’s forced shutdowns and the demand for iron ore slowing dramatically in the interim,” he said.
Mr Lucas said tourism was likely to be impacted and hitting companies which would include Qantas who “have a very large share of the Asian tourism market”.
Qantas shares have dropped 9 per cent in two weeks, but Baker Young Stockbrokers managed portfolio analyst Toby Grimm said the airline had fared better than its global competitors.
“It’s amazing how resilient the market has been,” he said.
“Be cautious not to overreact.”
Mr Grimm said investors who sold out during previous global health scares had missed out on the inevitable rebound as companies profited from pent-up demand.
“If people don’t travel now they will delay their plans and travel later,” he said.
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As for potential sharemarket winners, it’s slim pickings.
Experts say health-related companies could do well, and biotech giant CSL has climbed 4 per cent in the past two weeks.
Medical gloves maker Ansell is up 3 per cent since mid-January, while telecommunications companies could benefit from more videoconferencing.
SHARES IN THE FIRING LINE
• Travel companies including Flight Centre, Corporate Travel Management, Webjet and Helloworld Travel.
* Resources companies with big exports – think Fortescue Metals Group, BHP and Rio Tinto.
* Airlines and domestic tourism companies such as theme park owner Ardent Leisure.
* Exporters with big markets in China.