SINGAPORE, Jan 22 — Asian stock markets bounced today as China’s response to a virus outbreak tempered fears of a global pandemic, although Shanghai shares slipped amid worries about a hit to domestic demand and tourism.
Fears of contagion, particularly as millions travel for Lunar New Year festivities, has pushed stocks from record peaks.
The outbreak has revived memories of the Severe Acute Respiratory Syndrome (SARS) epidemic in 2002-03, a coronavirus outbreak that killed nearly 800 people and hurt world travel.
Yet this time, China’s response and candour — in contrast to the initial cover-up of the SARS outbreak — has tempered some of the gravest fears about the possible global fallout.
China’s National Health Commission said today there were 440 cases of the new virus, with nine deaths so far. Measures are now in place to minimise public gatherings in the most-affected regions.
The Shanghai Composite index recovered from an early 1.4 per cent drop to trade 0.5 per cent lower by mid-morning. Markets elsewhere advanced, driving the MSCI index of Asia-Pacific shares outside Japan up 0.5 per cent.
Japan’s Nikkei, Korea’s Kospi index and Hong Kong’s Hang Seng all rose by more than half a percentage point after heavy drops yesterday. Australia’s S&P/ASX 200 shrugged off worries to hit a fresh record high.
“The call here is not that the virus is done or nipped in the bud by any means,” said Kay Van-Petersen, global macro strategist at Saxo Capital Markets.
“But there have been no big further reported outbreaks, and the response from the Chinese authorities has been very, very positive... China is 1.4 billion people. This is not the first time they’re tackling a bug that’s gotten out of hand.”
The outbreak, from its origin in Wuhan, China, has reached the United States, Thailand, South Korea, Japan and Taiwan.
Cases have been confirmed in 13 Chinese provinces.
The World Health Organisation (WHO) meets later today to consider whether the outbreak is an international emergency.
SARS flashback
Airlines, other travel-exposed stocks and retailers vulnerable to shifts in consumer sentiment have borne the brunt of selling in the past two days along with the Chinese yuan.
MSCI’s airline industry index posted its biggest daily drop in more than three months yesterday and shares in the industry were still falling today.
On Wall Street overnight, the Dow Jones Industrial Average fell half a per cent and the S&P 500 dropped almost a third of a percentage point, led by falls in airlines and China-exposed casino operators.
“While details on the coronavirus are scant, we reckon that the SARS period could offer some clues as to how markets could pan out,” said analysts at Singapore’s DBS Bank.
“The trends are clear: Yields and stock prices fell in the first few months of the SARS outbreak and rebounded thereafter.”
So far, the yield on US 10-year government bonds has stabilised after yesterday’s drop, sitting a little firmer at 1.7865 per cent.
Spot gold also gave back some gains to hold 0.3 per cent weaker at US$1,553.01 per ounce.
In currencies, the safe-haven yen eased slightly from the one-week high it touched overnight, although the yuan nursed its losses. It was steady at 6.9026 per dollar.
Oil prices also settled back as traders figured a well-supplied global market would be able to absorb disruptions that have cut Libya’s crude production to a trickle.
Brent futures settled down 20 cents at US$64.59 a barrel. US crude fell 20 cents, or 0.3 per cent, to US$58.38 per barrel. — Reuters
