World stock markets have plunged after a double blow from the coronavirus and an oil price war between Russia and Saudi Arabia.
The Hang Seng Index in Hong Kong, which consists of 50 companies listed on the Hong Kong Stock Exchange, dropped 1,700 points on Monday, the worst one-day fall in two years. Financial Secretary Paul Chan Mo-po said the government is closely watching the situation and will take action, if necessary. Chan unveiled his budget two weeks ago, forecasting a deficit of HK$37.8 billion for 2019-20, Hong Kong’s first deficit in 15 years.
The New York Stock Exchange paused trading for 15 minutes as part of a “circuit breaker” after a 7 per cent decline of the S&P 500 index, which tracks the stocks of 500 US companies. A “circuit breaker” is a rule that temporarily stops trade on a stock market or closes it when prices go down to a particular level too quickly.
The coronavirus has severely affected economic activity. For example, the International Air Transport Association forecast that airlines could lose more than US$100 billion.
Local airline Cathay Pacific has been forced to close its final cabin crew base in Canada and offer unpaid leave to its staff to save money. The airline is expected to post a 2019 profit of about HK$1.15 billion, half of 2018’s results.
Oil prices crashed after Russia and Saudi Arabia, two major oil-producing countries, failed to reach an agreement to reduce production. The talks came in response to a sharp decline in demand from China, which has locked down cities and closed factories in a bid to contain the spread of the coronavirus.
While low oil prices mean shipping goods and travelling would be cheaper, the worldwide epidemic means people are staying at home, further affecting global economies.
Hong Kong’s tourism industry has been badly hit. Only 3.2 million visited Hong Kong in January, a decline of 53 per cent from the same period last year.
According to official statistics, the city’s unemployment rate is now at a three-year high of 3.4 per cent. Meanwhile, the jobless rate in the retail, accommodation and food services sectors stood at 5.2 per cent.