- Hong Kong’s benchmark Hang Seng Index plunged by as much as 2.8 per cent on Tuesday, its biggest intraday decline since November 11
- In Shanghai, the A Share Index retraced 1.4 per cent, while a similar benchmark in Shenzhen dropped by as much as 1.3 per cent
The stock rally in mainland China and Hong Kong has lost its pace, after a pneumonia outbreak in the Hubei provincial capital of Wuhan claimed a fourth life.
Stock traders began unwinding their positions on Monday, after a weekend report by the Chinese government of confirmed cases spiked to more than 100, from just a handful days earlier. The disease, attributed to a new coronavirus from the same family that caused the 2003 Sars pandemic, has spread to Shanghai, Shenzhen and Beijing, according to Chinese media.
Hong Kong's benchmark stock index plunged by as much as 2.8 per cent on Tuesday, its biggest intraday decline since November 11. In Shanghai, the A Share Index retraced 1.4 per cent, while a similar benchmark in Shenzhen dropped by as much as 1.3 per cent.
Airlines, tour agencies, hotels, theme parks and restaurants led declines, amid concerns that another outbreak similar to the one 17 years earlier would deter people from congregating in public places, hurting their earnings.
"That's a knee-jerk reaction that most affects investors psychologically," said Wu Kan, an investment manager at Soochow Securities in Shanghai. "The epidemic will cause volatility on the market in the short term depending on how it plays out."
The virus, currently denoted 2019-nCov, was first traced to Wuhan city in central China to a local wet market, where live animals from chicken to snakes were slaughtered and sold in close space. As many as 198 cases of the pneumonia was reported over the weekend. Four people died, while 25 were discharged, according to Wuhan's health commission. Two cases were confirmed in Shanghai the commercial hub, while eight were reported in Shenzhen, dubbed the Silicon Valley of China, according to local health authorities.
Airlines were among some of the worst-hit stocks, amid concerns that a viral outbreak would deter air travel just as China is in the early days of its annual Lunar New Year holiday, when an estimated 3 billion trips will be made over a 40-day holiday period ending on February 18. That includes 450 million trips by Chinese tourists to such favourite destinations as Bangkok, Seoul, Osaka and Tokyo. A case has been reported in South Korea, just days before the tourism rush began.
Air China, the country's flag carrier, led declines, plunging on the Hong Kong and Shanghai exchanges. China Southern and China Eastern, two other large state-owned carriers, also declined. The shares of Cathay Pacific Airways, Hong Kong's hometown carrier, fell by 5.6 per cent, their biggest intraday decline in nearly four months.
"Some market participants may be overanxious," said Alan Li, a portfolio manager at Atta Capital in Hong Kong. "The government and the general public are more experienced than 2003 when Sars happened. It's quite obviously in Hong Kong. At the very beginning, people already started to wear surgical masks, and now the number of the people wearing masks is increasing."
China International Travel Service, the franchiser of the nation's duty-free shops, sank 3.6 per cent to 83.75 yuan. Jiangsu Tianmu Lake Tourism, a tour operator based in eastern China, plunged 6.3 per cent. The stock had lost almost 10 per cent in value in two days.
The slump extended to Macau, where even casino stocks fell on concern that the outbreak of an infectious disease " health authorities admitted the pathogen is being transmitted between humans " would scupper gambling just at the beginning of the Chinese festive season.
MGM China Holdings tumbled 6.2 per cent to HK$12.94 in Hong Kong, while Wynn Macau plunged by as much as 6 per cent. SJM Holdings, one of the casinos operated by the family of the gambling magnate Stanley Ho, fell 5.8 per cent.
While the Chinese government and exports say that the new strain of the coronavirus is not as deadly or contagious as the severe acute respiratory syndrome (SARS), the damages caused by the plague on the economy and the stock market almost two decades are still fresh to investors.
Sars, which was first detected in Guangdong in December 2002, spread out to almost every province in China and other 28 countries, infecting 8,069 people and killing 772, before being put out in the middle of 2003, according to the World Health Organisation. The epidemic knocked two percentage points off China's quarterly economic growth and halved growth in monthly retail sales, taking its toll on industries from tourism, catering and retailing to even manufacturing. The Shanghai Composite Index fell as much as 19 per cent in 2003.
Still, some investors say the Wuhan pneumonia would not be as devastating as the Sars and the strong momentum on stocks would carry on, given the quick government response and the early preventive measures taken.
The dip on Tuesday was largely a reflection of investors' concern about the sustainability of the growth recovery after an uptick in the December economic data, according to Zhu Bin, chief strategist at Southwest Securities.
"The Wuhan pneumonia coronavirus does not have a significant impact on the stock market," Zhu said. "The downward trend on the stock market is more due to subdued market sentiment that the coming economic data would not be favourable."
With additional reporting by Liu Yujing.
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