Coronavirus spread in US drives down market sentiment, with Hong Kong and China joining major Asia peers in falls
- US sees cases top 1,000, with clusters on both coasts
- Markets waiting to hear President Trump’s plan to boost world’s largest economy smacked about by the virus
Hong Kong and China stocks slid Wednesday, as coronavirus infection cases topped 1,000 in the US and investors waited for President Donald Trump’s stimulus plan to boost the virus-stricken American economy.
Asia stocks fell as well, with Australia entering a bear market, joining Japan.
As China digs itself out of the virus outbreak that began there, the US and the rest of the world are in the midst of a nightmare of increased infections and deaths, as well as disruptions to travel, work, school and other mainstays.
“Once again, the US Covid-19 case count has become the market mega talking point in most circles again today,” Stephen Innes, chief market strategist of currency trading platform AxiCorp, wrote in a fresh note.
“And it was causing risk sentiment to pivot south, triggering a more significant buy into gold in Asia this morning. There is no escaping that inevitable headline as the Covid-19 headcount numbers will climb rapidly higher from current levels, possibly in an explosive way. And it’s going to hit the market like a ton of bricks when the terminals start flashing red.
“The question is, can we stand another few weeks in Covid-19 purgatory with the markets on the precipice of a cliff edge?” Innes asked.
The US, the world’s largest economy, has experienced wild swings in its markets, with a plunge Monday that was the biggest since the financial crisis of 2008. Trump’s promise of a “major” stimulus package earlier this week helped calm markets, but he failed to unveil anything specific Tuesday, and some Republicans in the Congress balked at some of the floated items, saying they wouldn’t bring immediate relief.
The US is seeing outbreaks on both of its coasts, with at least 24 people dying in Washington state alone, and the governor of Massachusetts declaring a state of emergency as cases spiked to nearly 100 in part due to infections traced to a biotech meeting at a Boston hotel last month.
Worldwide, nearly 4,300 people have died, more than 3,100 of them in mainland China.
The Hang Seng Index closed down 0.6 per cent at 25,231.61, with losses seen in everything from Chinese oil majors like CNOOC (down 5.9 per cent) to its beer companies like China Resources Beer (down 3.6 per cent). Chinese companies account for more than half of the market capitalisation of the city’s stock benchmark.
China airlines, however, took off, led by Air China (up 1.2 per cent), on expectations they will benefit from lower oil prices and the sense that the worst is over inside the country in terms of the virus. President Xi Jinping sent a loud message Tuesday when he visited Wuhan – the epicentre of the virus – for the first time since the outbreak.
Meanwhile, the Shanghai Composite Index fell 0.9 per cent to 2,969.
“To encourage people to go back into the markets, we need something from the medical fields on the vaccines, such as whether any vaccines have been tested on humans with positive effects,” said Louis Tse Ming-kwong, managing director of VC Asset Management.
But traders also see positives ahead in the form of economic stimulus.
“Policy expectations from U.S. and China are the major positive factors,” Kenny Wen, wealth management strategist at Everbright Sun Hung Kai. “But I do expect the Hang Seng Index will remain highly volatile. 5G remains our top pick. The banking sector may be one to avoid as it is highly correlated with the global economy and [expected lower] interest rates will hurt their profit.”
In Asia, Tokyo’s Nikkei 225 closed down 2.3 per cent, while Seoul’s Kospi dropped 2.8 per cent and the tech-heavy Kosdaq tumbled 3.9 per cent.
Australia’s S&P/ASX200 closed down 3.6 per cent.
Of noteworthy stocks in Hong Kong, Cathay Pacific rose 3.1 to HK$10.18 after it reported better-than-expected results. It made a profit of HK$344 million (US$44.2 million) in the second half of 2019 and HK$1.7 billion in the full year, despite disruptions in travel due to anti-government protests.
However, Hong Kong’s flagship airline warned it will incur a “substantial loss” in the first half of this year because of the coronavirus, which has caused the most upheaval to global air traffic since the financial crisis in 2008 and the September 11 terror attacks in 2001.
In China, China sectors that lost included brokerages, semiconductors and smart speakers, while Wuhan local stocks continued to rise from Xi’s visit, and shipping shares gained on lower oil prices, according to tracking gauges.
Liquor distiller Kweichow Moutai was 0.2 per cent higher to 1,158.52 yuan. Meanwhile, Apple AirPod maker Luxshare Precision Industry was down 2.7 per cent to 43.97 yuan.
