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https://scmp.com/business/money/stock-talk/article/3048261/hong-kong-stocks-sink-lowest-seven-weeks-sell-sparked Stock Talk
Hong Kong stocks sink to lowest in seven weeks on sell-off sparked by Wuhan virus fears
- The benchmark Hang Seng Index has dropped 9 per cent since a January-high reached just two weeks ago
- The biggest losers were in the commerce and industrial sectors as investors fear the Wuhan virus’ impact on suppliers in the country will be significant
The benchmark Hang Seng Index has dropped 9 per cent since hitting a month-high of 29,056.42 just two weeks ago. Photo: Bloomberg
Hong Kong stocks fell sharply for a second day, closing 2.6 per cent lower at 26,449.13, their lowest level since December 10.
The benchmark Hang Seng Index has dropped 9 per cent since hitting a month-high of 29,056.42 just two weeks ago. While analysts said the sell-off over the past two days was driven by fear, they also see the losses in the Hang Seng bottoming out.
“I think this is actually a positive time for traders to start thinking about buying at the current level, while there are still a lot of uncertainties about whether the situation will stabilise, but come next Thursday there could be a turning point in terms of news flow,” said Linus Yip, chief strategist at First Shanghai Securities.
He was referring to the lockdown of Wuhan, the epicentre of the coronavirus outbreak, which will reach its 14th day next Thursday, February 6. Most countries, including China, have applied a 14-day medical observation period for people exposed to the pathogen.
By then, Yip said the end of the observation period in Wuhan could provide more clarity from China about whether the authorities have successfully got a handle on the spread of the virus. Confirmation of a breakthrough may trigger a rebound in stocks.
The sell-off on Wednesday came amid more forecasts of how the new virus could dent China’s economic growth.
As the number of cases rose to more than 7,700 and the death toll increased to 170, Plenum, a China-focused research group, forecast that the disease-control measures could drag China’s first quarter gross domestic product down by 4 percentage points.
Additionally the lockdowns within Hubei, a province of 14 cities including Wuhan, could pull down national GDP by another 1.5 percentage points. China’s 2019 full-year GDP growth was already the slowest in 29 years, at 6.1 per cent.
“It’s hard to say whether the drop in the Hang Seng will narrow on Friday, but given the blue chips have been sold off before China’s market reopens, there could be some buying interest from Chinese investors through the stock connect when the market reopens next week,” said Yip.
As on Wednesday, the sell-off was across the board. In percentage terms the biggest decliners were in the commerce and industrial sectors as investors fear the Wuhan virus’ impact on China’s economy and global suppliers located in the country will be significant.
Leading the declines were AAC Technology, which plunged 7.5 per cent to HK$55.4 and Sunny Optical, which shed 7.4 per cent to HK$128.2. As leading Apple iPhone suppliers in China, these stocks suffered from an expectation that Apple’s supply chain would be disrupted as the virus spreads.
Financial heavyweights also weighed heavily on the index. Insurer AIA fell 3.1 per cent to HK$78.3 and China Construction Bank lost 3.1 per cent to close at HK$6.
Macau casino operators extended their previous day’s losses. Sand China dropped 4.1 per cent to HK$37.4, while Galaxy Entertainment sank 2.5 per cent to HK$51.8.