Negative impacts of corona virus

By | February 23, 2020

Introduction

According to the research performed by the World Health Organization on Coronavirus” COVID-19”, it has infected more than 75,000 people till date, and has led to 2,000 deaths. The study was performed on people in Wuhan, China.  Out of 2000 people who died due to being infected by this virus, 15 were from the US, and the remaining one were from China.

Negative impacts of corona virus

The majority of cases were happened to people while they were traveling on the Diamond Princess cruise ship. To prevent further spread of infection, government is performing body-temperature checks at the entrances of casino that requires customers as well as employees to wear masks.

Due to the spread of the Corona virus, there is seen slowdowns, and closures in factory production of the products. Due to the presence of virus found in the Chinese health care system, delay is observed in medical device processes in China.

Due to the result of the spread of the COVID-19 infection, an adverse impact is noticed on the 4th Quarter financial results of the country. In terms of product sales, there is seen a major inclination towards food and consumables. Due to the outbreak of corona virus, an increased expense has been recorded by companies that has negatively impacted the sales in Quarter 1 of the financial year.

There are several retailers who had to ultimately shut down their stores in China. A few of them have reduced their working hours and some retail stores only offer limited operations. Due to reduced business, many companies have reported loss of revenue due to the spread of this virus. It has also resulted in reduction of earnings of the workers employed in businesses that have been impacted by this virus.

A negative impact is seen on both margins, and revenue generation. As China is the high-margin business in areas of manufacture of snacks, several companies from all across the world are affected by the outbreak of this virus. Due to shortage of the number of trucks, and other transportation options in China, the outbreak of this virus has led to an increase in the transportation cost as well.

COVID-19 virus is projected to exert pressure on small and independent lessors in China. According to the Fitch ratings, it has been speculated that the ongoing outbreak of corona virus “COVID-19”, will amplify the operating challenges especially for leasing firms in China.

Small and independent commercial Chinese lessors who have relatively weak financial profiles will be more prone to suffer from this virus. However, the adverse impact of the virus epidemic on the major state-owned enterprises lease holdings of banks, and some large-scale independent lessors will not see massive breakdown as they will be assisted by their established liquidity, and funding profiles.

It has been predicted that businesses who are associated with tourism, non-food retail, and hospitality sectors will be less impacted. Moreover, the interruption of a few supply chains, logistics, and manufacturing activities will hamper the operational efficiency of lessors towards generation and collection of new business.

It is expected that this epidemic situation will result in exerting a greater credit pressure on corporate leasing, independent firms that have high exposure to self-employed, and SMEs. These are the firms that have weaker credit profiles and are more prone to external shocks. If the outbreak of corona virus is prolonged, then it can also result in decline in quality of meaningful assets.

The pressure of asset quality impairs the access to asset-supported securities market, and bank loans. This in turn will worsen the weakness in liquidity, and funding mainly for small lessors who have frail credit profiles. These are the firms that are very much dependent on debt issuance, and lessee repayment to assist in meeting their debt requirements. The outbreak of corona virus is going to be destructive for these firms.

There are also speculations that cash flow, and revenue generation will lower due to reduced air traffic. The impact of virus on the ship-leasing business of leasing firms is moderately controllable in the short term because of their worldwide presence, borrower types and asset diversification. It will all help in lessening the short-period shock.

The business will continue to suffer if global trade volumes reduce drastically for a continued time period. This is expected to happen due to a lengthy supply-chain disturbance in China and sluggish worldwide economic growth.

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