Wuhan arises? Parts of China have already started getting back to work. Travel is supposedly still limited. China has completely flattened the curve of this viral spread, at least officially. Wuhan, the birthplace and original epicenter of the Covid-19 pandemic has targeted April 8th as the date to kick-start production in a city of roughly 11 million people. Can you believe China? That their cities are safe? Can you believe their data? Who am I to answer that question. I do know that Starbucks (SBUX) , and Apple (AAPL) , both U.S. firms, have opened or are opening their retail locations across that nation. Safe? Certainly safer.
First Down, First Up
First quarter results, both corporate as well as macro, should be awful for China, probably even worse than many ever imagined. That, as many nations across this planet have been forced to react to the health crisis, effectively shutting down economies, even first world economies on every continent. As China emerges from the wreckage of January and February to probably show limited improvement in March. Beijing has been aggressive in trying to aid the rest of the world as the rest of the world has struggled. A show of goodwill after trying to cover up the virus in the beginning? An effort to show strength or "soft-ish" power at a time when others will feel compelled to accept and then later feel compelled to show gratitude? I hate to think like this, but it is difficult not to.
For China, reestablishing the Belt and Road Initiative would begin with trying to reinforce badly damaged supply chains. The problem for China might become, if they have really beaten this virus, could be that there is no business or consumer demand for the goods that sold so well just a few months ago, nor will there be for a good long time. The latest CNBC Global CFO Council survey shows 40% of companies with an interest, do expect to see negative supply chain issues that last between three to six months.
Then there is a tremendous likelihood, in my humble opinion, that U.S. large caps with supply lines that run far afield in nothing more than a bold attempt to maximize margin may at least partially try to reverse course on such aggressive globalization. Would not firms like Apple, or Nike (NKE) have been better served if there had been shorter supply lines already in place when the crisis began? That's serious food for thought.
Where To Go?
Where to invest as China restarts that economy? Okay, so maybe Apple will be able to manufacture their coming series of 5G capable iPhones on time. That may be good for Apple if consumers across troubled economies can still buy those goods. More than likely, this information would be more beneficial to Apple suppliers such as Qorvo (QRVO) or Qualcomm (QCOM) than maybe for Apple itself.
As this production ramps, these firms may be forced to market Chinese consumers more than they might have otherwise, as these consumers will not be in various states of lock-down, which is why so many of the chips have started to show some life. I can think that this would be key to performance for the likes of Broadcom (AVGO) , Micron (MU) , and Texas Instruments (TXN) .
One other thing that I think investors will want to have on their minds will be recreation. No, I really can not imagine tourists lining up to board cruise ships anytime soon, at least I would not. Air travel will rebound before seaboard leisure. Think a stock like Wynn Resorts (WYNN) , or a stock like the Walt Disney Co. (DIS) with closed theme parks around the world. Imagine the positivity created once Disney thinks it safe to reopen Shanghai, and Hong Kong? Then perhaps Tokyo?
Know what? These people going back to work, have to eat. May grab some Yum China (YUMC) later today. Just sayin'.