Singapore Sars case prompts transport, hotel stock sell-off
The virus' return has scared a market ripe for profit taking
Asian transport and hotel stocks were heavily sold down yesterday on fears that an isolated outbreak of Sars in Singapore could presage a return to restrictions on travel, bringing with them damaging economic consequences.
The selling was a knee-jerk reaction to a single unexplained case of the killer respiratory disease but regional equities appeared ripe for a burst of profit taking after some of the steepest gains since the boom times of the mid-1990s.
'The case could be a big cloud to the [economic] recovery in Asia,' said Dong Tao, the chief regional economist at Credit Suisse First Boston (CSFB).
In Hong Kong, the Hang Seng Index hit a 15-month high in the morning session but fell sharply in the afternoon to close down 1.06 per cent at 11,046.82 points.
Travel-related stocks led decliners but sharp falls in China-linked stocks indicated investors were using the opportunity to book profits and reduce their exposure to equities. The setback comes as many brokerages have been touting the theme of Asian reflation leading to a take-off in long-moribund equity markets.
In Singapore, the Straits Times Index tumbled 2.59 per cent to 1,580.14 points.
Should new Sars cases come to light, the flow of funds into the local market could be abruptly reversed with attention shifting to shorting strategies on weakness, China Everbright research director Frederick Tsang said.
Shares in Singapore Airlines closed 6.08 per cent lower. Star Cruises, the region's largest cruise operator, dropped 12.12 per cent.
In Hong Kong, Cathay Pacific Airways fell 3.32 per cent while Asia's leading hotel chain, Shangri-La Asia, finished the day 8.39 per cent lower.
Most market players argued that a single case of Sars did little to undermine prospects for the travel industry.
'Firstly, we've got one case, and until people get a better grip on where it came from and the risks, then we can't concern ourselves with the risks to follow,' CSFB head of transport and conglomerate research Peter Hilton said.
Analysts have focused on an improving international economic environment, with evidence of growth in the United States and Japan underpinning a rebound in Asian demand.
Many believe Asian governments are equipped to deal with a renewed Sars outbreak, drawing on experience of quarantine and screening gained in the spring.
Others said the shock factor would not be so pronounced in the case of a renewed outbreak.
ING strategist Kingston Lee King-yue said Sars was an excuse for profit taking.
He saw a 5 per cent downside for the Hong Kong market should the global environment remain stable.
Markets report - B8
