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HSBC shares rose on Friday even after the bank said that it would close some branches to contain the spread of the coronavirus outbreak, as the number of confirmed cases in Hong Kong rose to 12. Photo: Bloomberg

Hong Kong stocks end dismal week lower as investors fear worse is yet to come from coronavirus outbreak

  • The Hang Seng Index ended January 6.6 per cent lower, its worst monthly loss since August
  • Further downside in store next week as China A-share market reopens

The Hang Seng Index ended 0.5 per cent lower at 26,312.63, the lowest level since December 05, even though panic selling over the past two sessions eased off on Friday. For the month, it lost 6.6 per cent, the biggest since August 2019.

However, analysts see further downside in store next week, as the China A-share market reopens and most expect key China indices to fall because of the health scare caused by the coronavirus outbreak.

“Given the current market situation, cash is king. Fund managers are selling as they need to get prepared for higher redemption demand from investors in funds exposed to Hong Kong stocks,” said Alvin Cheung, an associate director at Prudential Brokerage.

China has reported nearly 10,000 confirmed coronavirus cases and more than 200 deaths. The novel virus has affected several foreign businesses on the mainland, including Levi Strauss & Co, which has shut about half of its stores in the country. Sales from China account for 3 per cent of the apparel maker’s revenue.

As infections continue to mount in China, an increasing number of companies on the mainland have extended their Lunar New Year holiday up to mid-February, supporting the government’s efforts to contain the outbreak.

In Hong Kong, HSBC said it will shut 24 branches across the city from Monday as the number of confirmed cases rose to 12. HSBC shares gained 0.3 per cent to HK$56.85.

Coronavirus outbreak could hit airlines, hotels, casinos harder than Sars, analysts say

Cheung said that depending on the extent of the outbreak, a downside of 24,900 is possible if the contagion spreads and the number of fatalities continues to rise. That level, which was also a 2019 low, was reached in August when Hong Kong was hit by the double whammy of US-China trade war tensions and violent anti-government protests

Weighing on the index were financials. Ping An Insurance lost 1.4 per cent to HK$88.7, AIA fell 0.7 per cent to HK$77.75 and China Construction Bank shed 0.8 per cent to HK$5.95.

Index heavyweights Tencent Holdings dropped 0.5 per cent to HK$373, while China Mobile lost 0.6 per cent to HK$64.2.

But selective blue chips bucked previous days’ decline, including Macau casino operator Sands China, which rose 1.6 per cent to HK$38 and AAC Technologies, which edged up 0.6 per cent to HK$55.75.

Drug makers and health care related stocks continued to rise. Shanghai Pharmaceutical and Frontage Holding rose at least 4 per cent each, while Guangzhou Baiyunshan Pharmaceutical added 2 per cent.

Cheung cautioned that even at current levels, with the Hang Seng trading at 10.8 times price-to-earnings multiple and a 3.7 per cent dividend yield, investors have to be cautious in their search for bargains because of downside risks.