Too early to bottom fish stocks beaten by Wuhan coronavirus, analysts say, stick to new economy companies
- Airlines, casinos, property stocks have seen big slides in Hong Kong since first reported Wuhan death, but could suffer deeper losses amid uncertainty
- New economy stocks likely to bounce back first
It’s too early to bottom fish stocks that have crashed from the Wuhan coronavirus outbreak, analysts say. Instead, investors should look to new economy companies that are expected to bounce back first.
Some Hong Kong listed stocks have dropped more than 25 per cent since January 10 – the last trading day before the first reported death from the virus that originated in central China’s Hubei province. As casualties spread, share prices have collapsed among sectors from airlines and property, to casinos and retail, as investors reduced holdings of companies directly hit by the more than 46 million mainland Chinese staying at home under lockdown.
Last week, the Hang Seng Index (HSI) dropped 5.9 per cent in a dismal first week of the Lunar New Year, as the epidemic scared investors off. The bourse ended the week at 26,312.63, flirting with the support level of 26,000. That was a bigger drop than some analysts expected, sparking concern the benchmark could fall below 25,000 in the coming few months.
“The HSI may have the chance to test the previous low last year of 24,900,” said Castor Pang, head of research at investment services firm Core Pacific-Yamaichi.
“Since the Hang Seng is still closing below market open and turnover is very weak for this correction … it seems to be not attractive enough for investors to bottom fish,” he said. “That is why the industries have the chance to [fall] further.”