Tuesday, February 11, 2020

Wuhan coronavirus outbreak - Thoughts and Personal Impact

(Source: itv.com)
1. Background and Thoughts
2. Impact to Businesses
3. Impact to Portfolio
4. Impact to Holidays
5. Under Mandatory Quarantine

Background and Thoughts
Unless one has been living in the caves free of civilisation and technology, one would already heard of the Covid-19 / Wuhan Coronavirus (2019-nCOV) and the escalating situation belying the outbreak. Since then, what has happened?
  • Lock-down of cities in China
  • Suspension, reduction of flight frequency, and cancellation of flights between China and other countries, including Singapore
  • Shares of companies who has business exposures to or in China, or shares exposed to retail, tourism and hospitality in particular are among those hit the hardest, depending on the degree of exposure
  • As of 7 February 2020, DORSCON raised from Yellow to Orange.
  • People in Singapore panic-buying and hoarding essentials in supermarkets, to the extent NTUC Fairprice had limited how much essentials each person can buy (See: Straits Times - FairPrice limits purchases of paper products, rice, instant noodles and vegetables amid coronavirus outbreak)
  • Global death count exceeded that of SARS outbreak
    Some are studying opportunities in the stock market amidst the situation. There are also some analysing the trend of the virus outbreak and relating to SARS outbreak back in 2003.

    See: World Of Meters - Wuhan Coronavirus Update

    I am generally interested to see the impact on the fundamentals of businesses after - the extent of the impact, and the method and time taken to recover from or mitigate this.

    From what I see:
    • If the trend of the virus outbreak reverses (i.e. confirmed cases and death drops off), that could be a starting point to observe recovery in businesses that has been negatively hit.
    • Globally, assuming the virus outbreak is successfully contained, the trend of the virus outbreak is anticipated to lag behind China and reverse some time after it does in China - some have anticipated this lag to be a month or so.
    There are talks of how the virus is vulnerable to exposure to warm weather and the sun's UV rays. By extension of that, if the world is successful in containing the virus outbreak by the time warm weather (summer or even spring) rolls about, there will be a rapid drop in new cases. This was also based on looking at the trend during SARS outbreak back in 2003.

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    Impact to Businesses and Share price
    As mentioned earlier, business with exposure in China, as well as the retail, hospitality and tourism industry will be impacted to varying degrees. Correspondingly, shares of such publicly-traded companies and REITs has been affected as well.

    For example, Sasseur REIT, a REIT with a portfolio of 4 retail outlet malls all located in China, had to close all of their malls for an indefinite period. Their non-operational period is going to put a huge damper for this financial year.

    See: The New York Times - Singapore-Listed Sasseur REIT Shuts China Malls as Wuhan Virus Spreads

    On the other hand, certain stocks related to healthcare, such as Riverstone (being glove makers) and Raffles Medical Group (being in the healthcare industry) saw a spike in their share prices before dropping to only a slightly higher price before the spikes occurred.

    Share price YTD for Riverstone Holdings (Source: Yahoo! Finance)

    Share price YTD for Raffles Medical (Source: Yahoo! Finance)
    Hundreds of companies have warned of impact to 1Q20 earnings as reported on Forbes. Indeed, industries such as retail, travel, fast food and gaming will see a hit.

    See: Forbes - Over 400 Companies Have Warned of Impact Coronavirus Could Have On First Qaurter Earnings

    A lot of companies in China have started to take on bank loans to soften impact of the virus outbreak, and China's central bank has also injected cash into the banking system. Additionally, the local bureaus of the National Development and Reform Commission (NDRC), the top economic planner, and the Ministry of Industry and Information Technology (MIIT) are also compiling lists of affected companies and offering them support.

    See: Yahoo! Finance - Hundreds of Chinese firms seek billions in loans amid coronavirus outbreak

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    Impact to Portfolio
    See: Portfolio Main Page

    Lendlease Global Commercial REIT understandably has had its share price dropped to 0.900 or thereabout, given its majority exposure to Somerset 313 in Singapore. I do however feel if the virus outbreak is successfully eradicated over the next several months (May/June?), they should do okay.

    For Prime US REIT, nothing much to say here - share price itself was not impacted, but the forex exposure has been a positive.

    Fu Yu Holdings saw its share price found itself correcting to 0.245 - 0.260 range for the past few days, but otherwise does seem to be holding up for now. To be honest, I am surprised it hasn't gone down further. To shed more light on its China exposure, they have a total of 8 plants, of which 4 are located in China (they recently consolidated their Shanghai operations with Suzhou). If they do get impacted by the outbreak, I hope they are able to receive help from NDRC and MIIT.

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    Impact on Holidays
    (Author's note - this section is more of a ranting session for me)
    My wife and I went back to Hainan to celebrate Chinese New Year with the in-laws mid-January. This was very important to my wife as she has not been back to celebrate Chinese New Year for the past 8 years she has been in Singapore.

    What was meant to be a very joyful event has unfortunately, got marred by the outbreak.

    News broke out that the Wuhan coronavirus situation have escalated about a week and a half after touch-down. Instead of visiting relatives-in-law for Chinese New Year, or going to visit places in Haikou, Sanya or Baoting to enjoy ourselves, we confined ourselves at parents-in-law's place.

    Fortunately, it was quite safe - being a non-touristy area, we had, collectively, very few cases in the city and they are all away from the town I was staying in. The locals takes great effort to observe preventive measures (e.g. masks, social distancing). It also helps that the area is less population-dense in comparison to Singapore. It was to the extent we felt safer back in Hainan than we currently feel back here.

    To make matters worse, we were also on the afternoon of 31st January, we found news of flight frequency reduction and change of flight days from Scoot which will affect our flight. We were not sent any notifications and had to find out through browsing their website. The only reason why we caught the notification was because our relatives in Singapore have hearsay and told us to look out for announcements, prompting us to visit Scoot's website everyday.

    We had trouble calling in to Scoot on our end, but through proxy in Singapore (my brother managed to reach out to Scoot), their customer service assured us e-mails were sent to affected customers only, and since need not do anything about our flights except to keep an eye out for news.

    That very evening on the same day, at 11.50pm, we receive e-mail notification of our flight cancellation. The notification also covered news of suspension of flight effective from 4th February till 28th March and that they will refund the unused itinerary.

    Both of us being gainfully employed in Singapore, we cannot afford to be locked down. There was no option to rebook earlier flights on our existing itinerary and we had to buy new one-way tickets. Only remaining flights available were on 1st and 2nd February, costing about SGD 500+ and SGD250+ each respectively.

    (Author's Note: The whole point of us having bought the ticket to have us return back to Singapore on 4th February on the original itinerary was because the earlier dates were too expensive.)

    Attempts to reach out again to Scoot customer service for clarification fell flat and we were forced to buy the earliest available one-way flight back to Singapore on 1st February, fearing Scoot's last-minute changes again that will make any recovery impossible. We packed our luggage within an hour and after another 8 hours or so, we boarded our flight back.

    Upon return to our home back in Singapore, we took efforts to disinfect our home and ourselves. Once we were adequately rested, we reached out to Scoot and AXA.

    Here's the kicker in summary:
    • Scoot's Customer Service advised they can't do anything beyond refund of the original unused itinerary
    • AXA's Customer Service advised possibility of our circumstances not having grounds to make claim after hearing us out
    While we (both ourselves and our extended families on both side of the family trees) are safe and sound and I appreciate how Scoot has probably already tried within their means to respond to the escalation, I am disappointed of:
    • How Scoot has handled overall communications of the escalation
    • How Scoot is unable to go further than refund of the unused portion of the original itinerary
    • The possibility that AXA's travel insurance cannot cover the increased cost of the replacement ticket. Nevertheless, going through the coverage, I do feel we still have a case. We are attempting and have made our claim and keep our fingers crossed it will work out in the end.
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    Under Mandatory Quarantine
    As a result of the situation escalating, we have been on Leave of Absence (mandatory quarantine) since touchdown back to Singapore. It's currently Day 11 of 14 as of completing this article.

    I guess there is a silver lining despite the unfortunate turn of events - we took this opportunity to take care of other businesses which we would otherwise have more difficulty and/or less energy or motivation to do.

    I cooked special dishes I have planned to try out for quite some time among my share of meal duties (we split our cooking duties ~50/50), and did plenty of catching up on other leisurely activities, studying the stock market and last but not least, brainstorming ideas on new blog articles and improvements to the whole blog.

    The Mrs, besides cooking her share of our meals, doing some leisurely activities and having work-from-home arrangements, had taken the opportunity to catch up on her essay required for her Bachelor's degree (she's still an undergraduate). I can't wait to see her graduate. :)

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