Coronavirus - Beware the ides of March

Markets are firmly in risk-off mode over fears of a broader impact on the global market, with Italy (click here to see our note), South Korea and Iran all seeing an acceleration in cases. These geographies all offer new springboards for the virus, making containment much harder. Currently, 98 of the FTSE 100 are down on the day and 240 of the FTSE 250 are showing the widespread nature of the market setback. Companies will start to quantify the impact during the results season, although it is probably too early to tell the full impact on supply chains.

Cases: 749
Deaths: 158

Cases: 79,480
Deaths: 2,616

Company news
• AB Foods – Has a number of food business operations in China. Its AB Mauri, AB Agri and Ovaltine factories are operating, but at reduced capacity due to labour and logistics constraints. Primark sources a range of its products from China. Although due to normal inventory build-up prior to the Chinese New Year, it is well stocked for several months and does not expect any short-term impact. The company is working closely with its suppliers in China to assess the impact on its factories and supply chains and its ability to fulfil current orders. If delays to factory production are prolonged, the risk of supply shortages on some lines later this financial year increases. The company is assessing mitigating strategies, including stepping-up production from existing suppliers in other regions.

• Ascential – “The board is actively monitoring the unfolding situation in respect of the coronavirus outbreak. While China is an important, long-term, strategic growth market for Ascential, revenues from Chinese customers are today a relatively small part of the group (less than 5% overall and with just 2% of attendees of Cannes Lions from China, for example) and we have not yet seen any material impact on trading from the situation. As a precaution, and to reflect travel difficulties in the region, we have previously communicated to participants that we have moved the date of Money20/20 Asia in Singapore from March to August 2020. We continue to monitor the potential impact of travel restrictions for Chinese delegates and sponsors to events in Europe (such as Retail Week Live in London in March). We are also mindful of the impact that coronavirus might have on the business performance of our customer base in areas such as fashion but again have seen no significant impact to date.”

• Air New Zealand is targeting earnings before tax in the range of NZ$300-350m in 2020, if the adverse impact of the coronavirus is NZ$55m, which is the mid point of its guidance range of NZ$35-75m.

• Bunzl – “Although the group only has a relatively small distribution business in China and is not a manufacturer, group companies around the world do import products from China for onward sale to their customers. At the present time, the group's supply chain is not considered to be at risk since the group's businesses had previously built up higher levels of stock than usual in advance of the Chinese New Year and, in any event, tend to hold higher stock levels of many of the products whose production has been affected by the factory shutdowns in China. In addition, alternative sources of supply are being sought. However, should the impact of the virus continue to restrict manufacturing activities in China for a sustained period of time, the group may face some shortages of certain products.”

• BlueScope Steel’s CEO said “the supply chain is still winding up, so getting access to trucks and logistics is taking some time. By no stretch of the imagination are our businesses operating at full capacity.”

• Dechra – “We have sufficient inventory of Chinese sourced materials to deal with near-term supply, however a prolonged period of interruption would lead to out of stocks.”

• Judges Scientific – “With the current scale of the outbreak, and provided it does not last more than three months and remains largely contained within China, it is not expected that there will be a significant impact to the group's 2020 trading. The group operates with an average three-month order book, so in the near term, the current travel restrictions are expected to only have a temporary impact, deferring rather than reducing revenue. Unaudited revenues for China/Hong Kong represented £9.5 million in 2019. In relation to judges’ supply chain, direct and indirect supply from China varies from business to business in the group, with only one subsidiary having significant supply chain exposure. The board is monitoring developments closely and at this stage of the outbreak, currently considers that supply chain disruptions will be manageable.”

• GlaxoSmithKline Plc and Clover Biopharmaceuticals, a Chinese biotechnology company, have entered a research partnership on a potential coronavirus vaccine.

• Nissan’s president for Europe says “there are no suppliers at risk in Europe due to the coronavirus” adding that alternative supply solutions have been found.

• China has postponed the annual session of Parliament due on 5 March.

• Four Serie A games in Northern Italy, scheduled to take place on Sunday, were cancelled. Inter Milan v Sampdoria, Atalanta v Sassuolo, Verona v Cagliari and Torino v Parma.

• Venice has also cancelled its Carnival Event due to the virus.

• The World Athletics Indoor Championships, scheduled for Nanjing from 13-15 March, has been postponed until next year.

• The Chinese Football Association said domestic games, at all levels, have been postponed.

• Vietnam said it would not allow any sports events to be hosted in February.

• South Korea’s professional soccer league has postponed the start of its new season.

• Airports Corp. of Vietnam is forecasting 35 million fewer passengers using its airports this year than in 2019 (vs 116m last year).

• China’s top legislature decides to fully ban wildlife trading and consumption, state-run China Central Television has reported.

• Wuhan’s government has reversed an announcement that it would relax travel restrictions.

• President Xi has hailed the positive trend in declining cases in China, and urged businesses to resume work and safeguard jobs. He also told low-risk provinces to restore economic activity and output, while high-risk regions focused on controlling the epidemic. 24 out of China's 31 provinces and regions – including Beijing, Shanghai and populous provinces such as Henan and Anhui – reported zero cases of new infections on 23 February. Yunnan, Guangdong, Shanxi and Guizhou on Monday lowered their coronavirus emergency response measures from the most serious level, joining the provinces of Gansu and Liaoning in relaxing restrictions on traffic and movement of people.

• Vietnam carrier Bamboo Airways has suspended all flights to and from South Korea.

• Italian bond yields up 8bps as the outbreak worsens in the country.

• Bank of Korea is delaying its rate decision (was due Thursday).

• UAE has banned its citizens from travelling to Iran and Thailand over coronavirus fears.

• Oman halts all flights to Iran after its first two cases of coronavirus had recently visited the country.

• Tajikistan has halted all flights to Iran over coronavirus fears.