Originating in the province of Wuhan in late 2019, the Coronavirus outbreak has plunged China into a nationwide health emergency. 29 countries have been exposed to the virus so far and the reported death toll is more than 2,000 individuals. Given how China has dominated the global economy in the last few decades, we must also prepare for the impact of the Coronavirus on financial markets.
Read on as we discuss how the Coronavirus is affecting some of the most powerful companies from around the world and what this means for investors.
Apple’s Warning to Its Investors
You may be well aware of the role China plays in the global supply chain. The country is a vital supplier for multinationals, such as Apple Inc. However, after the outbreak of the Coronavirus, China’s manufacturing industry has been unable to operate properly and operations have halted to a significant extent. Consequently, Apple has issued a warning to its investors, stating that the company will see a dip in its quarterly revenues due to slow production in China.
The company’s manufacturing facilities are located on the outskirts of the Hubei province, which was declared as ground zero of the outbreak. Besides manufacturing, the company also generates approximately 15 percent of its revenues from China. However, due to store closures and low customer traffic, there has been a marked decrease in iPhone sales in the country.
According to a statement released by Apple, investors can expect production to resume in China soon. However, it will take a while before manufacturing plants begin to operate at full capacity again.
As a result of these developments, the company’s stock values declined by 1.83 % on Nasdaq, as well. Other companies that have felt the effects of the outbreak include Tesla, Alibaba, Nike, and Walt Disney. Nike has reportedly closed 50 percent of its stores in China, a move that caused its stock value to fall by 1.49%. Walt Disney also anticipates its operating revenues to reduce by $175 million. The company’s theme parks in Shanghai and Hong Kong have been shut down, causing a direct loss in revenues.
China Cancels Major Global Events
China is also expected to postpone major international events because of the Coronavirus outbreak. For starters, the country’s biannual auto show, “Auto China 2020,” will be postponed. It was scheduled to begin on April 21st in Beijing, but now, it has been shifted to an unspecified date.
China is also considering the postponement of its annual congress. This is easily the biggest political event of the year in China. Other major events that have been canceled include the Shanghai Formula 1 Grand Prix and a Hong Kong art festival. These cancellations are likely to have a severe impact on China’s gross domestic product, reducing its contribution to the global GDP.
Currencies Decline in Value Post Coronavirus Outbreak
Currencies in the Asia-Pacific region have also been affected by the Coronavirus. Among these, the most significant impact of the Coronavirus on financial markets was felt by the Australian dollar. It declined by 4.3% against the US dollar in 2020. The Thai Baht and the Singapore Dollar also diminished in value due to hampered supply chains and a fall in Chinese tourism.
In a Nutshell
Analysts have predicted that the global economy is likely to decrease in the first quarter of FY2020 due to the impact of the Coronavirus on financial markets. This will be the first time in a decade that global economic performance will decline. It remains to be seen how China recovers from the Coronavirus outbreak and regains its place as an economic superpower.