AlphaValue sees danger in the second order impacts of the 2019 nCoV virus.
It is increasingly clear that the issue is less one of Chinese consumers postponing purchases but more one of supply chains grinding to a stop with two direct consequences: the ex-China world economy may be impacted, particularly in those sectors where inventories have been trimmed to the bare minimum and the risks to the financial system, as the weakest components of that chain cannot survive delayed business.
AlphaValue explored a bottom-up harsh case scenario and narrowed down on a first set of sensitivity analysis on both the Luxury and Hotels/Airlines sectors assuming a mild impact (peak of the crisis reached over Q1).
For these sectors it relied on the knowledge of its two Chinese sector analysts :
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