China hotpot shares, Haidilao, Hong Kong restaurant stocks fall

Chinese hot pot restaurant chain Haidilao logo seen in Shanghai. (Photo by Alex Tai/SOPA Images/LightRocket via Getty Images)

Alex Tai | SOPA Images | LightRocket via Getty Images

Shares of Hong Kong-listed restaurants tumbled on Monday, with Chinese hotpot chain operators such as Haidilao and Xiabuxiabu leading declines.

Haidilao’s stock, listed in Hong Kong, dropped more than 3% in Monday afternoon trade — after falling beyond 7% earlier in the session. Another Chinese hotpot restaurant chain operator, Xiabuxiabu Catering Management, also plunged 5.41%.

Other Hong Kong-listed restaurant operators also saw declines. Tsui Wah Holdings fell 2.44% while Cafe De Coral dropped 1.59% and Fairwood Holdings shed 0.73%.

Hotel operators also saw losses, with Far East Consortium sliding 1.49% and Langham Hospitality Invesments declining 1.47%.

The moves came after the South China Morning Post reported Sunday that nine members of the same Hong Kong family contracted the coronavirus after sharing a hotpot and barbecue meal at a restaurant called the Lento Party Room, which has no known connection to Haidilao.

Analysts who spoke to CNBC on Monday said the sharp downward movement in Haidilao’s stock was likely related to those reports.

“In general, restaurant business during virus outbreak suffers,” Hao Hong, head of research at BOCOM International, told CNBC in an email. “In the Guangdong province, 97% of restaurant businesses reported greater than 50% drop in revenue and 1/3 reported zero revenue.”

“The situation is grave,” he said. “Haidilao, despite being a strong company in the sector, is suffering along.”

The new coronavirus outbreak, which has already taken more lives than SARS, has spooked investors and dragged down global markets and sectors such as airlines and travel-related shares.It has so far killed more than 900 people in the the mainland and infected over 40,000 others. The virus has also spread to more than two dozen countries.

Kingston Securities’ Dickie Wong told CNBC in a text message that Haidilao’s stock was a “strong sell” at the moment. That comes as the restaurant operator’s mainland China stores remain shuttered until further notice, as authorities see to clamp down on the spread of the virus.

“Restaurant operators and hotel operators stocks will continue to slide,” said Wong, who is executive director of research at the firm.

BOCOM Hong said customers will likely be “circumspect” about going to restaurants — even if the situation around the virus passes soon.

Haidilao shares were hovering at about 31 Hong Kong dollars on Monday, 2:50 p.m. HK time. Hong warned that the stock could be headed for 25 Hong Kong dollars per share if it breaks the 30 Hong Kong dollar mark.

Last week, the Chinese capital of Beijing banned caterers and individuals from organizing group gatherings, and said arrangements before that ban should be canceled or postponed. Rural areas around Beijing are also prohibited from organizing banquets — whether for festivals, birthdays or school promotions. Similar measures have not been announced in Hong Kong.

— CNBC’s Evelyn Cheng contributed to this report.

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