The market has recently experienced some panic selling due to the coronavirus. It escalated when the cases and deaths were reports in Italy. The level of concern around this virus has heightened and this has been reflected in the level of fear in the market. This is the list of stocks which are most affected by the coronavirus crisis.
1.Stocks with high beta
Stocks with a high beta move much more than the market. That is, stocks with beta which are above 1.00 mean that they will potentially move more than the market, and stocks with a low beta will move less than the market. Therefore in situations when there is a global sell off, high beta stocks are the first to fall the most.
There have been concerns that the corona virus may have caused global economic growth to slow down. Because resources are linked to global growth, if the sentiment is that growth will weaken, then investors will also start to offload resource stocks.
Stocks which are linked to global growth which are not resource stocks will also be affected. For instance, Amcor (ASX:AMC). This is a packaging company which will be affected by a global growth slowdown as there is will less demand for packing. They also have factories in China which are experiencing partial shut-downs.
Travel stocks will likely suffer during the coronavirus as more cases of death are reported. Stocks such as Webjet (ASX:WEB) and Flight Centre (ASX:FLT) have been falling since the outbreak and still have not recovered. As more fear spreads, people will be cautious about buying flights and investors will rotate out of travel stocks lowering the share price even further.
As people around the world are cautious about travelling due to the coronavirus, this will affect companies involved in tourism in Australia. This may include casinos such as Crown resorts (ASX:CWN) and Star entertainment (ASX: SGR) as they rely on tourism and Chinese tourists for their revenue.
6.Chinese consumer stocks
Companies which are reliant on Chinese consumers may suffer a slow down in revenue from the corona virus. This can include companies which rely on Chinese students or Australian companies selling products to the Chinese. Chinese consumers will not be spending money while they are in lock down in their homes.
7.Stocks with a high P/E
When there is overall market fear, stocks with high P/E will be sold down. Companies which are expensive, ie their stock prices do not reflect their intrinsic value, will be first to be cut. This is because investors/traders will see them as being too risky to hold in a volatile market. The risk is that as these stocks are already overvalued, there is a possibility the stock will have a large sell down.
Lauren Hua is a private client adviser at Fairmont Equities.
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