The Wuhan Virus Scare: 3 Industries That Could Benefit Or Be Unaffected

2020-07-08     thesmartinvestor
The Wuhan Virus Scare: 3 Industries That Could Benefit Or Be Unaffected

A new virus (named the Novel Coronavirus) has emerged from Wuhan, China, and is affecting people with pneumonia and flu-like symptoms.

Known as the “Wuhan virus”, the death toll in China has jumped to 132 at the time of writing, with more than 6,000 cases confirmed.

As the virus spreads, many countries are reporting new cases of the Wuhan virus. Thailand, for instance, has confirmed 14 cases of infection. In Singapore, the number of confirmed cases has risen to seven.

In response, investors are witnessing a sell-off in markets as fears of uncontrolled transmission grow by the day.

But not all industries are affected.

Here are three industries that either benefits from or are unaffected by the Wuhan virus that investors can consider.

1. Hospitals and Medical Clinics

With the surge in the number of new cases in the Wuhan virus, demand for medical services could soar. The direct beneficiaries of the demand could be hospitals and medical clinics that operate in China.

Initial reports have mentioned that hospitals in Wuhan, the epicentre of the viral outbreak, have been overwhelmed as the number of patients has exceeded the available hospital beds. There may be a spill-over effect to other provinces’ hospitals and clinics, thus benefitting businesses that have operations there.

An example that comes to mind is Raffles Medical Group Ltd (SGX: BSL).

The group opened a hospital in Chongqing back in January 2019 and is slated to open its second Chinese hospital in Shanghai in 1H 2020. The building structure for Raffles Hospital Shanghai was completed in May 2019 and recruitment of staff and doctors is underway.

2. Surgical Glove Manufacturers

Another industry that gains from disease outbreaks is the surgical glove industry.

Surgical nitrile gloves are made from butadiene (a derivative of oil) and are sold to hospitals and healthcare institutions. The gloves act as a physical barrier, preventing the spread of diseases arising from physical contact.

During disease outbreaks, the demand for rubber gloves likely soar, as more hospitals and medical centres require them to handle increasing numbers of patients.

Examples of listed rubber glove manufacturers are Top Glove Corporation Berhad (SGX: BVA), Riverstone Holdings Limited (SGX: AP4) and UG Healthcare Corporation Ltd (SGX: 41A).

These companies could enjoy a surge in orders as long as the Wuhan viral outbreak continues, and the demand may continue to linger thereafter as countries step up hygiene practices in the aftermath.

3. Fibre-Network Owner/Operator

Meanwhile, some industries such as fibre networks may be unaffected by a virus outbreak.

In good times or bad, businesses and people need internet connectivity. As such, fibre networks can be considered recession-resistant.

NetLink NBN Trust (SGX: CJLU) is the owner and operator of Singapore’s next-generation nation-wide (NBN) broadband network.

During this viral outbreak episode, NetLink will likely be unaffected. We should expect the company to continue to collect fees from each connection point while signing up new residences and businesses onto its fibre network.

Get Smart: Viral epidemics are temporary events

For most Singaporeans, the Severe Acute Respiratory Syndrome (or SARS) episode was a bad nightmare. Fears of a deadly virus spread like wildfire causing people to stay indoors. Malls and parks became ghost towns, devoid of people.

As history from the SARS outbreak has shown, such viral epidemics usually need time and effort to contain and control.

As we are likely to be in the early stages of the outbreak, there will naturally be fear as there are many unknowns, such as how far will the virus spread and what the fatality rate will be.

However, history has shown that such events will eventually pass into history.

Investors will need to be alert to sift out the attractive companies and be able to patiently hold through the volatility in order to enjoy the eventual rewards.

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Disclaimer: Royston Yang owns shares in Raffles Medical Group Ltd and NetLink NBN Trust.

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