Global equity market thrashing boomerangs back to Asia as coronavirus outbreak spreads to more countries

Old playbook predicts quick end to market volatility after a disease outbreak and more government stimulus. That may not happen this time, said Fidelity International

Benchmark indexes fall in nearly all of the Asia-Pacific region’s stock markets

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Contrary to global conventions, China’s stock markets denote losses and declines in green, using red data to illustrate gains and advances. Photo: EPA-EFE

Published: 11:08am, 25 Feb 2020Updated: 5:11pm, 25 Feb 2020

The overnight rout in US and European equity markets boomeranged back to much of Asia on Tuesday morning, after the global coronavirus outbreak spread to Iran, Italy and South Korea.

The Dow Jones Industrial Average plunged by 1,031.61 points overnight, or 3.6 per cent, giving back all its gains this year while the broader S&P 500 made its biggest one-day drop since February 2018. The plunge extended to Asia, with nearly all major indexes declining.

Equity benchmarks fell in nine of the 18 major markets in the Asia-Pacific region, with seven reporting gains while the gauges of Shanghai and Shenzhen were mixed.

South Korea and Kuala Lumpur were rare advancing markets in Asia. Hong Kong’s Hang Seng Index managed to eke out a small 0.3 per cent gain to 26,893, after bargain hunting began in the afternoon session.

The global sell-off was caused by weekend reports of a spread in the coronavirus outbreak, with deaths reported in Iran, more than 200 confirmed cases in Italy and South Korea jumping up the ranks to have one of the biggest number of diagnosed infections outside mainland China.

As traders woke up to the severity of the epidemic, they reacted with panic, said Fidelity International’s Asia-Pacific chief investment officer Paras Anand.