- Hong Kong stock market makes ‘black debut’ for fifth year in a row as benchmark index slips 3 per cent at the open
- Mainland Chinese markets to delay opening to Monday following State Council ruling
Hong Kong's key stock index made its worst opening since 2016 on the first trading day of the Year of the Rat, as traders ran for cover after a two-day pause amid a worsening coronavirus outbreak.
The Hang Seng Index opened at 27,101, or 3 per cent below its January 24 close on the final trading day of the Year of the Pig. That makes it its worst opening since the Year of the Monkey in 2016, when the market opened 3.6 per cent lower at the open.
Hong Kong Exchanges and Clearing (HKEX), the city's bourse operator, cancelled a ceremony for the first time in two decades to mark the first trading day of the new lunar year, to prevent crowds from gathering in a closed space, at a time when eight cases of the Wuhan coronavirus have been confirmed in the city.
It will be deemed a "black debut" if the index ends the first day with a loss, traders said, an omen that bodes ill for the market for the rest of the year.
"The Wuhan coronavirus has been spreading around the world. It will affect market sentiment in the near term, as the disease will hit the tourism and retail industries of Hong Kong," said Jeffrey Chan Lap-tak, founding partner of Oriental Patron Financial Group. "These sectors have already been hit hard by the eight-month-long anti-government protests."
Chinese authorities said that the death toll from the coronavirus outbreak had surpassed 130, with new cases bringing the tally beyond 6,000.
As a result, some banks and companies in Hong Kong have taken precautionary steps to help contain the outbreak, joining the government by asking most of their staff to work from home. HKEX will also scrap the traditional lion dance performance, the first time in the exchange's two-decade history.
If sustained at the close of trading, today's drop would mark the fifth year in a row in which the Hong Kong market had a "black debut" based on the Chinese calendar.
Wednesday's black debut was the fifth in a row for the Hong Kong market. The Hang Seng Index fell 0.2 per cent on its first trading day of the Year of the Pig in 2019. It declined 0.8 per cent in the Year of the Dog in 2018, lost 0.2 per cent in the Year of the Rooster in 2017 and slipped 3.8 per cent in the Year of the Monkey in 2016.
The two most recent Years of the Rat also do not provide much encouragement for investors. In 1996, the benchmark index ended the first day with a 2.2 per cent setback on concerns about interest-rate increases. In 2008, it crashed 3.6 per cent, or 853 points, on debut, before the onset of the global financial crisis.
The Year of the Rat, however, holds more promise on a full-year basis, with the exception of 2008 when the market dropped 46.4 per cent as investors panicked after the global financial crisis began to spread. The Hang Seng Index recorded a 221 per cent gain in 1972, 29.5 per cent in 1984 and 17.8 per cent in 1996. The benchmark was introduced in 1969.
During the 2003 severe acute respiratory syndrome (Sars) epidemic " to which comparisons are being drawn with the current outbreak " the benchmark fell 12 per cent the two months to end-March, at the height of the epidemic. The index rose 1 per cent on May 2, 2003 when the disease came under better control.
Notably, the Hong Kong market was not suspended during Sars either.
The mainland Chinese markets in Shanghai and Shenzhen, however, will delay their opening until Monday, February 3, instead of January 31, Friday, in tandem with an extended Lunar New Year public holiday ordered by China's State Council.
The mainland markets were also closed during the Sars outbreak as well, after the China Securities Regulatory Commission extended the May Day public holiday until May 12, thus shortening trading by four days.
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