The Flight Centre Travel Group Ltd (ASX: FLT) share price has taken an altitude dip today and is trading 3.74% lower at the time of writing at $39.92 a share.
Flight Centre shares opened at $39.90 this morning, a far cry from the $45 per share they were commanding less than a month ago on New Year’s Eve.
Why are Flight centre shares crashing today?
There’s no official news out of Flight Centre’s management today, so we can assume that most of the negative sentiment driving Flight Centre shares down is related to the ongoing crisis surrounding the coronavirus outbreak. Disease outbreaks are one of the largest deterrents for people wishing to travel and the markets know this.
The coronavirus outbreak is also centred in the Wuhan province of China. Given China is one of the largest contributors to both Australian and global tourism, this major disruption to the market is likely to have significant flow on effects, especially if the virus continues to spread to other countries and regions.
In addition to Flight Centre, most travel-related shares on the ASX are being hit hard today. Qantas Airways Ltd (ASX: QAN) has shed more than 5% at the time of writing, while Corporate Travel Management Ltd (ASX: CTD) and Sydney Airport Holdings Pty Ltd (ASX: SYD) share prices are also carrying heavy losses.
Australia is a large trading partner to China, with the country being one of our largest export partners. Businesses ranging from mining to agriculture and tourism are likely to be significantly affected by these events, which in turn could impact on the positive sentiments we have seen in the markets since the start of the year.
What’s next for Flight Centre shares?
The largest factor pressing on the Flight Centre share price is the potential severity and spread of the coronavirus. If the disease continues to spread, then it’s unlikely sentiments will shift on Flight Centre and other travel-related stocks in the short-term and may even deteriorate further.
However, it is also worth noting that these events often tend to elicit panic and fear, which in turn often leads to irrational selling. Obviously, travel-related stocks are first in the firing line in this regard, which explains the violent downward moves that we have seen today.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Flight Centre Travel Group Limited, and Sydney Airport Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.