Data room

Stock Watch

7 February 2020

The Shanghai Stock Exchange plunged -8.9% after opening for trading on 3 February following the Lunar New Year holiday, as investors reacted to the coronavirus outbreak.

Chinese authorities moved to shore up confidence in the market by announcing a CNY1.2 trillion (US$174 billion) capital injection into the financial markets. This however was not enough to assure investors spooked by the widening spread of the coronavirus.

Inevitably, the outbreak has impacted markets and the stock prices of travel-related companies around the world.

The Moodie Davitt Report Senior Retail and Commercial Analyst Min Yong Jung reports that global stock markets have shown high volatility since 20 January, when confirmed cases of the coronavirus jumped. Global equity markets have plunged with investors paring back their investments in search of safe haven assets such as gold, the Japanese Yen and the US Dollar.

Since 17 January, the Shanghai Stock Exchange Index and Hong Kong’s Hang Seng Index have been worst hit by the coronavirus. China and Hong Kong were impacted most by SARS and memories of the negative economic fall-out remains fresh in the minds of investors who are comparing the latest outbreak to events in 2003.

Companies heavily reliant on duty free business with Chinese customers have been hardest hit, with Korean stocks Shinsegae, Amorepacific and Hotel Shilla among them.

In the period tracked here (closing prices on 21 January to 5 February), shares in Hotel Shilla have fallen -10.9%. The company announced it had broken its Q4 sales record on 3 February, with a +29% year-on-year increase to KRW1,544 billion (US$1.30 billion), but has had to close stores in Seoul and Jeju as a result of the coronavirus outbreak, which is weighing heavily on investor sentiment.

Shares in China Duty Free Group (CDFG) parent China International Travel Service were down -7.1%, and have dropped -13.6% since 1 January.

Among the other companies we track, Dufry subsidiary Hudson Group saw its stock price fall significantly at -18%. Shares in Lagardère Group were down -6.7%, although subsidiary Lagardère Travel Retail’s Foodservice division announced good news as it passed the €1 billion (US$1.1 billion) sales milestone for the first time in 2019, with turnover doubling over the course of three years. The achievement was the result of a combination of strong organic growth and new acquisitions, Lagardère said.

On 30 January, LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury products group, posted a +15% rise in recorded revenue to €53.7 billion (US$59.1 billion) for the year. Organic revenue growth was +10%.

The Selective Retailing business group (which includes DFS Group and Starboard Cruise Services alongside Sephora and Le Bon Marché) achieved organic revenue growth of +5%. Profit from recurring operations for this part of the business was up +1%. DFS Group experienced mixed fortunes in 2019, LVMH said, hit hard by the social unrest in Hong Kong while its T Fondaco dei Tedeschi by DFS store in Venice performed “very well”. Shares in LVMH dropped -2.3% in the period tracked here.

The Moodie Davitt eZine

Issue 276 | 7 February 2020

The Moodie Davitt eZine is published 20 times per year by The Moodie Davitt Report (Moodie International Ltd).

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