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The Wuhan coronavirus continues to do damage to the Chinese economy. The number of confirmed Wuhan coronavirus cases has recently surpassed 40,000, Macau has taken the drastic step of closing its casinos for 15 days, and China’s travel sector has been badly hurt.
If the coronavirus situation gets any worse, investors will be looking for safe havens. Among the many stocks available for purchase, Towngas utility The Hong Kong and China Gas Company Ltd (SEHK: 3) and stock exchange operator Hong Kong Exchanges and Clearing Limited (SEHK: 388) have many traits that make them appealing for investors looking for safety.
Not only do both companies have wide moats, but they also pay attractive dividends. Here’s a closer look at the two companies.
The Hong Kong and China Gas Company Ltd
The Hong Kong and China Gas Company Ltd, also known locally as Towngas, is an essential gas utility whose demand won’t be affected very much if the Wuhan coronavirus outbreak worsens.
According to Yahoo Finance, The Hong Kong and China Gas Company has a forward dividend yield of around 2.2% at current prices.
As a show of the gas company’s resilience, The Hong Kong and China Gas Company’s financial results were strong in 2003 when SARS, a virus in the same family as the Wuhan coronavirus, broke out in Hong Kong.
In terms of that virus’s effect on The Hong Kong and China Gas Company, the outbreak led to a decline in the company’s industrial and commercial gas sales due to the impact of SARS on Hong Kong’s hotel and restaurant sector. Since SARS was contained, however, demand rebounded.
For 2003, the group’s earnings per share (EPS) actually rose to 53.9 HK cents for 2003 from 53.6 HK cents for 2002. The group’s total gas sales by volume in Hong Kong also rose by 1.4% year-on-year.
Hong Kong Exchanges and Clearing Limited
Hong Kong Exchanges and Clearing Limited, better known as HKEX, is Hong Kong’s only stock exchange. Hong Kong Exchanges and Clearing Limited is a potential “safe haven” stock because it’s a monopoly in one of the world’s largest financial centers.
Not only does HKEX benefit from the development of the many red chips listed in Hong Kong, but also HKEX benefits from the trend of Chinese tech companies like Alibaba Group (SEHK: 9988) (NYSE: BABA) coming back home.
Although any unexpected suspension of trading could always hurt HKEX, the stock exchange could potentially benefit from the outbreak. If the Wuhan coronavirus gets worse, volatility and trading volumes could increase. If trading volumes increase, HKEX could gain more volume from exchange trading fees.
In terms of how HKEX did during the SARS outbreak, HKEX stock actually rose, rising from HK$8.90 on February 2 2003 to HK$12.90 on July 27 2003 .
In addition to being a potential safe harbour for investors, HKEX is also an attractive dividend stock. According to Yahoo Finance, HKEX has a forward dividend yield of around 2.87% at current prices.
HKEX and The Hong Kong and China Gas Company offer both an attractive dividend and a potential safe haven for investors as the Wuhan coronavirus outbreak continues.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Jay Yao doesn’t own shares in any companies mentioned.