Cinematic Sunday has moved into Movie Monday.
Last night, I re-watched Contagion. That's the fast-paced 2011 drama in which Gwyneth Paltrow, the index patient, inadvertently exports a mystery virus from Macau across the world.
This morning, my time, I applauded while watching the Oscar broadcast live as Parasite from South Korea became the first non-English-language film to win Best Picture.
Parasite is a truly original black comedy/drama/thriller. Nobody is too sure where to put it. But, beautifully framed and bravely conceived, the film is another I'll re-watch, tonight.
Contrary to my original impression, it has nothing to do with microbes or killer tapeworm. Any "horror" is purely human-induced, as a family from the unseen underclass, living literally below the city, infests an extremely wealthy one.
My immediate situation here in Hong Kong has more in common with Contagion, even if last year's demonstrations stemmed in part from this city's harsh rich/poor divide. Contagion's plot, the spread of the disease from bats that infect pigs and then humans here in southern China, is all too familiar. But the current crisis has only just entered the second act, and is far from the credits.
Today is the day that mainland China was meant to get back to work. The national government is keen for that to happen, to avoid too much disruption to the economy. It has a 6.0% growth target to hit. But with a record single-day death toll on Sunday, bringing us ever-nearer to 1,000 deceased, Wuhan Acute Respiratory Syndrome continues to spread.
The 40,171 infections are almost five times the total that ever caught SARS (8,437). SARS killed 813 people worldwide, and that total has also been exceeded. The ever-rising death count from what Chinese officials call Novel Coronavirus Pneumonia now stands at 910 as I write. Britain has newly classified what Hong Kongers call WARS as a "serious and imminent threat," which gives the health authorities broader powers.
Hong Kong has 38 cases of the virus after 10 members of the same family, who all shared a hotpot banquet with two relatives from mainland China, came down with it. Now the authorities are trying to track everyone that family came into contact with -- two went back to work at two different Chinese restaurants after the festive hotpot -- much as the CDC attempts to corner Contagion.
The Hong Kong police in real life are also hunting down two people under a mandatory 14-day quarantine in the city who have "jumped bail." Anyone traveling to Hong Kong from mainland China must serve a self-administered time at home or in a hotel. These two are on the lam.
Contagion saw the virus spread from Macau to Hong Kong, London, Tokyo and errr Minneapolis in a matter of hours. The movie disease is far deadlier than WARS, killing 25% of patients, compared with 2.3%. WARS has also spread more slowly.
But the next two weeks will be key, with Lunar New Year just concluded in China, travelers back home, some back at work, and the clock counting down the 14-day incubation period. Sunday was due to be the heaviest travel day as people returned to work, according to the Chinese transportation ministry.
Are there any trading strategies that can apply in this fast-evolving situation?
I agree with Standard & Poor's that e-commerce in China stands to gain. Already, 24% of all retail sales in China occur online. That will surge. Although overall retail sales in China are sure to drop as a result of the disease, even if there's a rebound when it abates, S&P is maintaining its forecast of annual online sales growth of 17% to 22% in 2020 and 2021.
"China's blistering rate of online retail sales has decelerated somewhat but remains in double digits," S&P credit analyst Ava Chang writes in a report released today. "We believe that this year's health crisis will further the long-term structural shift to e-commerce shopping."
A prolonged outbreak would undoubtedly hurt consumer sentiment and even online spending, particularly on discretionary items. What's more, procurement, logistics and delivery, the blood flowing through e-commerce veins, would also start to suffer. But for now, online retailers gain from high street's pain.
S&P rates a cluster of Chinese retailers.
China National Travel Service Group (SH:601888), with duty-free stores and a travel agency, is the most-vulnerable among them. Its core businesses suffer, with holiday travel way down and the ongoing travel restrictions only intensifying. You can't enter a Beijing residential building block unless you live there. Other cities and villages have closed themselves off to the outside world.
But China National Travel only has an A-share listing, making it hard for international investors to access. Other companies have international listings, and often a U.S.-listed ADR.
Hong Kong-listed GOME Retail Holdings (GMELY) , one of the biggest purveyors of white goods in China, is also suffering. It was already under heavy competition from online sales. The coronavirus will only heap further pressure on revenue growth and profits.
Department-store operator Maoye International Holdings (MAOYF) , also with a primary listing in Hong Kong, is suffering from constricted liquidity. That is only going to deteriorate further as shoppers stay home. The first quarter is the low season for department stores anyway, so that's a small blessing. But it looks like the impact of WARS will spill well into the second quarter.
One theory is that the disease will naturally dissipate when the weather warms up. But cases have developed in Singapore, where the tropical temperature is basically constant year-round. So that theory is also untested.
Meanwhile, there are three New York listings to watch for gains.
Alibaba Group Holding (BABA) has an A+ credit rating from S&P, and is a sure winner from the outbreak. It is also telling its employees to work from home until further notice, extending the furlough due to end for most companies today.
Alibaba also has other strings to its bow. It said on Monday that its Ant Financial arm, through its MYBank business, would offer 20 billion yuan (US$2.86 billion) in loans to Chinese companies. Half will go to companies in the epicenter, Hubei Province, at zero interest for the first three months, and a 20% discount for the next nine months. The other half will be offered at one-year tenures with a 20% discount on interest rates.
That's sure to be a winner with business owners and the bank regulators. Chinese authorities are urging banks to lower rates and extend loans to companies affected by the outbreak.
JD.com (JD) is another stock worth favoring in this situation. It has an online-grocery arm that is attracting customers who would ordinarily be populating conventional "wet markets" and grocery stores. Sales of vegetables, rice and eggs from its supermarket chain 7Fresh are up 300% compared with the same time last year.
JD.com and Alibaba are both rolling out no-touch "contactless delivery." Some meals are delivered with the temperature readings of the workers who prepared and delivered the food inside the box.
VIPshop Holdings (VIPS) operates the vip.com site, selling brand-name products mainly through flash sales. Though those are discretionary purchases, it can also use short-term promotions to drudge up sales at tough times. And it also operates the lefeng.com site, supplying cosmetics, health-care products, food and other consumer items that will continue to have relatively inelastic demand.
I'll explore further trading strategies as this week goes on. Meantime, if you're shopping for investment ideas in China, shop for online stocks.
