Wining & Losing ETF Areas On Coronavirus Outbreak
Zacks Investment Research | Jan 28, 2020 01:00AM ET
China’s Coronavirus outbreak has been spreading fast and wide, raising alarms that it could turn into a global pandemic. The virus is similar to SARS, which erupted in late-2002 in China and caused significant short-term economic losses. Global markets were hit hard in recent trading sessions (read: 26, 3, 6 and 4 , respectively.
Against this backdrop, we highlight ETF areas that are in winning and losing positions owing the coronavirus eruption (read: Don't Panic About Virus, Buy 5 Beaten-Down Top-Ranked ETFs ).
Losing Areas
Tourism
The Wuhan virus outbreak has lowered travel demand due to lockdown in Chinese cities, limiting movement of about 56 million people. Traveling has been affected on the global level too. Investors should note that the SARS outbreak was estimated to have hurt 30% of travel and tourism employment in China, Hong Kong, Singapore, Taiwan Province and Vietnam, per the UN .
Along with China’s transportation sector, the event is likely to disrupt global air travel. U.S. Global Jets ETF (KL:JETS) has lost about 4.7% in the past week (as of Jan 27, 2020). Hotel and casino operators Las Vegas Sands Corp (NYSE:LVS) and Wynn Resorts Ltd (NASDAQ:WYNN) , both of which have considerable exposure to China, have lost 9.7% and 12.9% in the same time frame, causing VanEck Vectors Gaming ETF PEJ has lost 3.1%.
Energy
China is the world's second-largest oil consumer. Chinese city lockdowns and fears of global contagion have hurt the transportation sector, causing adrop up to $5 (a barrel) if the crisis develops into a SARS-style epidemic.”
As a result, United States Oil Fund (NYSE:USO), LP Virus Scare Weighs on Oil ETFs: Go Short for the Near Term ).
Copper
Copper miners bore the brunt as China is a huge consumer of copper. iPath Series B Bloomberg Copper Subindex Total Return ETN COPX lost 8.8%.
Livestock
Trading of wild animals has been temporarily suspended in an attempt to contain the outbreak as the seafood and wildlife are deemed to be the COW has lost about 4.3% in the past five days (as of Jan 27, 2020).
Agriculture
There are growing fears that the outbreak will hurt global demand for grains. Prices of corn, soybeans and wheat slipped on Jan 27. Notably, China is key consumer of U.S. soybeans. Invesco DB Agriculture Fund (MI:DBA) has lost 3.4% in the past week.
Winning Areas
Biotech & Healthcare
Healthcare and biotech stocks are likely to do well on the growing need for the formulation of vaccines to fight the virus as well as higher demand for hygiene-related products. This puts the spotlight on stocks like Gilead (NASDAQ:GILD) and Moderna (NASDAQ:MRNA) .
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Gold
While industrial metals were beaten-down on growth worries, safe-haven metal gold glittered on the virus scare (read: 5 ETFs to Protect Your Portfolio From Coronavirus Threat ).
Bonds
The U.S. benchmark treasury bond yield slumped on Jan 27 to 1.61% from 1.84% recorded on Jan 17 on safe-haven rally. As a result, bonds benefited. Schwab Long-Term U.S. Treasury ETF SCHQ has risen 3.3% in the past week.
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