Coronavirus - Bump Start

Many factories are re-opening in China this week as hoped, although most at a reduced capacity due to travel restrictions and self-quarantine requirements. There are also issues around new operating regulations, which need to be in place before factories can re-open. The government has also cut interest rates on its medium-term lending to ease pressure on businesses and is believed to be planning additional fiscal spending. Reported new cases and deaths have stabilised over the weekend, although the WHO believes the peak is yet to come.

Company news
• Electronic design software company Altium expects profits to be at the lower end of its guidance due to the emerging uncertainty about the impact of the coronavirus.
• Beijing Sound Environmental Engineering Co. a Chinese waste management company warned of repayment uncertainties over a 500m yuan bond due this month because of tight liquidity in the wake of the virus outbreak.
• Petra Diamondshas seen significantly reduced activity across its pipeline. The already slow rough diamond price recovery will likely be interrupted by the COVID-19 outbreak reducing retail demand and, hence, the need for mid-stream restocking.
• Honda will further delay the restart of operations at some Chinese factories. However, Nissan's plant in Guanghe, Sichuan, will get back to work today as workers return, as will staff at BMW's China manufacturing bases.
• Mazda has restarted its Nanjing plant at reduced output, having previously expected to open on 10 February. The plant aims to achieve full operation gradually, in line with the availability of parts.
• Toyota said that of its four vehicle plants in China, those in Changchun and Guangzhou restarted manufacturing today. The factories in Tianjin and Chengdu will resume output from 18 and 24 February, respectively (or later). “[a]s we will only know the situation of local parts makers when we (actually) resume operations at our factories, we want to operate them carefully with safety the top priority,” said Toyota President Akio Toyoda.
• IBM has pulled out of the RSA conference in San Francisco.
• Novacyt has announced the launch of a CE-Mark approved molecular test for the clinical detection of the novel coronavirus COVID-19. The company stated that “as a result of the CE-Mark, the company's COVID-19 test can be used directly by laboratories and hospitals for the testing of patients without the need for validation by clinicians”. The shares have risen by 115% today.
• Swire Pacific, HK-based conglomerate and owner of Cathay Pacific, has flagged a significant drop in H1 profits and a cut in capacity of 40% at Cathay in February and March.
• Volex – “Following the company's announcement dated 10 February, we are pleased to announce that all of our four sites in China have now resumed operations, albeit at a reduced capacity.”

• The Beijing Auto Show, due to be held in April, has been postponed with no new dates provided. Around 800,000 visitors attend each year – about 5,500 of them from overseas. It host some 1,200 exhibitors from 14 regions.
• Facebook’s Global Marketing Summit, due to be held in March in San Francisco, has been cancelled. It typically brings in about 5,000 attendees.
• Tokyo marathon (1 March) has cancelled entries from the general public. 38,000 runners were expected to compete.
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• China's central bank cut the interest rates on its medium-term lending as policymakers sought to ease the drag to businesses from coronavirus. Further cuts in China's key lending rates are widely expected in the coming months to ensure a recovery takes hold. More fiscal spending is also believed to be on the cards, along with measures to boost domestic consumption.
• New home prices in China grew at their weakest pace in nearly two years in January.
• A survey of 109 manufacturing companies by the American Chamber of Commerce in the Shanghai region found that while two-thirds of factories were up and running by the end of last week, 78% did not have enough workers to meet full production. Almost 40% said that even if their workers did return, the factories would not have enough masks. This could lead to regulatory problems, with some authorities allowing factories to re-open provided they meet specific coronavirus prevention standards, such as supplying protective gear for all workers.
• The standing committee of the National People’s Congress will deliberate a proposal for the delay of the March session, Xinhua reported. The proposal was made in the belief that it is important to focus on curbing the coronavirus epidemic.
• A hotel near Heathrow airport has been closed to the public and designated as a potential coronavirus quarantine centre as health officials prepare for more cases in the UK.
• Bicester Village has said that the last two weeks have been “quiet”, estimating the branch has seen a drop of about 85% in the number of Chinese customers entering the store.
• The Macau government may allow casino operators to re-open their doors after a temporary suspension ends on Wednesday, Hong Kong-based Cable TV reported, citing Sands China Ltd. President Wilfred Wong. Wong said he expects few customers when casinos first re-open, and believes it will take two-to-three months before business can return to normal.
• Annualised GDP in Japan fell by 6.3% in October-December and will be weak in Q1 given the impact of coronavirus. The weak Q4 data was largely due to the increase in consumption tax.
• The virus outbreak will negatively impact the steel industry, although the size of potential damage is unpredictable due to a lack of information, Kiyoshi Imamura, managing director of Tokyo Steel Manufacturing Co., said at a briefing on Monday: ‘[t]here’s no sign the disease will be contained; it will take some time for production to return to normal”.
• Growth in Thailand is seen in the range of 1.5-2.5% this year, down from a previous projection of 2.7-3.7%, according to the National Economic and Social Development Council.
• Thai exports could shrink 10% in Q1 according to the Thai Shipping Association. China was Thailand's second-largest export market last year, purchasing goods worth $29.2 billion, or 11.8% of total Thai shipments.
• Singapore’s Ministry of Trade & Industry projected growth in the range of -0.5-1.5% in 2020, compared to a previous estimate of 0.5-2.5%. “As the COVID-19 situation is still evolving, there is a significant degree of uncertainty over the length and severity of the outbreak, and hence its overall impact on the Singapore economy”.
• Singapore airlines said it will maintain a minimum number of flights to China despite reduced demand.
• Oil traders have rented millions of barrels of extra storage in South Korea following weak demand in China.
• The Chinese premiere of No Time to Die in April has been cancelled.
• New Zealand’s Prime Minister Jacinda Ardern has said coronavirus will have a temporary effect on near-term GDP growth.

Country-by-country cases

Source: WHO

Canada 8
Egypt 1
Singapore 75
India 3
Thailand 57
Italy 3
Republic of Korea 30
Philippines 3
Malaysia 22
Russia 2
Germany 16
Spain 2
Vietnam 16
Belgium 1
Australia 15
Cambodia 1
USA 15
Finland 1
France 12
Nepal 1
UK 9
Sri Lanka 1
Sweden 1

*includes international conveyance