Displaying items by tag: China
Apple’s stock has suffered significantly last week since it announced that it would likely miss its revenue targets because of the virus outbreak in China. The stock is down 7% since the announcement and there is increasing speculation the damage may not be transient. The whole incident calls into question whether the country is too reliant on China for production (and also for sales). Many Wall Street analysts have pushed lost revenue for this quarter into other quarters, but it is not at all inconceivable to think that some of the sales may be lost permanently as consumers could have bought rival products, or just won’t switch at all (especially those in China).
FINSUM: Apple should probably work to adjust its supply chain as a reaction to this, but that seems unlikely. Hard to tell how this plays out; it depends on the news cycle.
An adviser to the World Health Organization has put out a very worrying forecast. He thinks that coronavirus may end up infecting two-thirds of the globe. The forecast is based on studies of the virus’ transmissibility, which has been on display in China. The prognostication also comes after rising evidence mounts that Beijing is falsifying, or at least underrepresenting, the number of cases reported. Scientists have found very odd and near-impossible correlations within the data China is releasing on this virus.
FINSUM: We don’t think China is being fully honest about the extent of cases, which then amplifies the transmissibility of the virus.
Just when you thought the market’s worries over coronavirus might be in the rear view mirror, more bad news has just struck. The largest single day rise in cases just occurred, with China reporting an additional 15,000 cases in a single day. That rise was more than 10x the previous day’s increase. The country reacted by firing top health officials in the Hubei province, which is the epicenter of the outbreak.
FINSUM: When you combine this information with the growing chatter than China may be drastically under-reporting cases, it makes sense markets are worried. 60m people in China are currently under quarantine. Economic damage is inevitable.
There have been many stories about how coronavirus could hurt the economy. We have covered the extent to which fears of the virus have hurt various sectors as well as general Chinese factory production. Today we have some concrete stats on how the virus is hurting trade. So far, there have been about 350,000 less shipping containers leaving China than there would have been without the virus. Dockworkers at major ports are sitting idle as nothing arrives. Fears of job losses are mounting because workers have nothing to do. The 350,000 figure includes China to Americas shipments as well as China to Europe shipments.
FINSUM: That is a phenomenal amount of production if you think about it, and that is only a portion of the export market. We think there is a good chance of a Chinese recession that may trickle into the global economy.
There is a lot of focus right now on how great an impact coronavirus will have on the stock market, both locally and abroad. So far it has impacted stocks on certain days, with the effect immediately disappearing soon after. The reality is, however, that coronavirus’ impact may be uneven, with some sectors getting hit badly and others being fine, even as benchmark indexes might seem largely unhurt. We have already written about how luxury retail is hurting because of a lack of Chinese tourists, but now it is looking like commodities might be deeply wounded across the board. China is a huge driver of commodity markets as its demand fuels the market. And with the economy so shut down, commodity demand is going to drop off a cliff.
FINSUM: What is most worrying is that commodity prices don’t seem to reflect this at all, which means they are at risk of plummeting.