Font Size

- Aa +

Wed 12 Feb 2020 10:19 AM

Font Size

- Aa +

Coronavirus presents opportunities to fill Chinese void, says HSBC Middle East exec

Daniel Howlett, HSBC regional head of commercial banking for MENAT says Turkey is already looking at alternatives

Coronavirus presents opportunities to fill Chinese void, says HSBC Middle East exec

The huge disruptions to production in China’s economy and beyond due to the coronavirus outbreak – through global supply chains into its export markets – will be felt in the weeks ahead. 

Disruptions to Chinese manufacturing as a result of the deadly coronavirus will open doors for other countries, according to Daniel Howlett, HSBC regional head of commercial banking for the Middle East, North Africa and Turkey.

Although parts of China remain shut down, roads in Beijing and the financial hub of Shanghai had significantly more traffic on Monday, while the southern city of Guangzhou said it would start to resume normal public transport.

"Some of the larger Chinese manufacturers seem set to return to work this week," noted senior market analyst Edward Moya at the online broker Oanda. 

Nevertheless, the huge disruptions to production in China’s economy and beyond due to the coronavirus outbreak – through global supply chains into its export markets – will be felt in the weeks ahead. Not only will a cyclical dent appear in China’s Q1 figures, beyond the one expected from the festive Lunar New Year season, but also in those sectors abroad that are heavily dependent on its production.

This could lead to opportunities for other countries to step into the breach.

Howlett told Arabian Business: “What will be interesting is to see, if it does continue, is what will happen in terms of where other sources of production will arise?

“I was in Turkey last weekend and I met with a number of companies that were positioning themselves as alternative sources of supply for textiles manufacturing. This will continue. People will look to find alternative short-term production sources.

“Inevitably people will find a way to ensure that they’re able to continue to guarantee their supply in the short-term. I don’t know how it will play out, but certainly there were situations like that in Turkey.”

HSBC Holdings Plc announced this week it is providing more than HK$30 billion ($3.9bn) in liquidity relief to its business customers in Hong Kong, joining other lenders that are easing borrowing terms to help companies battered by the coronavirus outbreak.

Janwillem Acket, chief economist, Julius Baer, said the coronavirus epidemic will not derail the global economy.

“In fact, leading indicators, like January’s purchasing managers’ indices, which were surveyed before the outbreak, indicate a broad-based global rebound of manufacturing back to growth together with an acceleration of services growth momentum,” he said.

“This signalled growth rebound will be delayed into Q2. However, it will coincide with the full weight of all the currently implemented stimuli and with pent-up (i.e. held back) demand from Q1. It is now one step backwards… but it will be three steps forward later on.”