The Kathmandu Holdings Ltd (ASX: KMD) share price is down 3.51% to $3.02 at the time of writing, in a turbulent day for shares with exposure to the travel sector.
With no price sensitive announcements coming out of the travel and adventure apparel company, we can assume the pressure on Kathmandu shares is related to concerns that the coronavirus outbreak appears to be getting more serious.
These concerns have caused ASX travel shares to plummet today, with Flight Centre Travel Group Ltd (ASX: FLT), Corporate Travel Management Group Ltd (ASX: CTD), Qantas Airways Limited (ASX: QAN), and Webjet Limited (ASX: WEB) all heavily impacted. Webjet has been the hardest hit, plummeting 13.48% to $12.41 at the time of writing.
Other shares that have exposure to the travel industry such as Crown Resorts Ltd (ASX: CWN) and Serko Ltd (ASX: SKO) are also down.
China imposes travel restrictions
A growing number of Chinese cities have placed restrictions on travel in an effort to contain the virus from spreading further. In addition, the United States (US) government has already given a recommendation to its citizens to avoid travelling to China.
Chinese health authorities have confirmed the coronavirus has killed just over 100 people so far and infected 4,000 globally, although the vast majority of these live in China.
Four of Australia's 5 confirmed cases are in NSW. It should be pointed out however, that so far there have been no confirmed cases of the virus spreading person-to-person on Australian soil, with all Australian cases having travelled from China.
Will Australia's tourism sector be impacted?
The coronavirus outbreak could significantly affect Australia's travel sector, particularly if more travel restrictions are imposed on international travel to slow down the spread of the virus, and this could have further impact on travel related shares such as Kathmandu.
Tourists from China now account for over 15% of total short-term inbound travellers to Australia, as compared with just 4% in 2003, according to an Australian Financial Review article sourcing Moody's.
As China plays a significant role in both Australian and global tourism, if the virus continues to spread to other countries and regions and there are prolonged restrictions on travel, it is likely to also impact other sectors of the economy and thus have a more broader impact on the ASX.
It is however important to point out that these types of events often lead to irrational fear in the short term, with the market overreacting to the severity of the event.
How much further will Kathmandu shares be impacted?
Kathmandu is involved in the design, marketing and retailing of clothing and equipment for travel and adventure. So, although there is unlikely to be any immediate impact to its sales, if further travel restrictions are put in place, consumers may decrease their spending in the market segment they operate in.
