Via Financial Times

Mainland Chinese and Hong Kong stocks tumbled as fears over the spread of a Sars-like virus on the eve of the peak lunar new year travel season hit tourism and retail shares.

Hong Kong’s benchmark Hang Seng index fell 2.5 per cent in Tuesday trading, in its biggest one-day fall this year, while China’s Shanghai Composite index was 1.5 per cent lower.

That came after China’s National Health Commission on Monday confirmed the first cases of human-to-human transition of the coronavirus. That has fuelled concerns over the spread of the disease, which has infected 224 people and killed four ahead of the start of the new year break this weekend. Hong Kong was also hit after Moody’s downgraded its credit rating late on Monday.

Shares in Shanghai International Airport, Air China and China Eastern all fell more than 2 per cent on concerns the virus could affect travel. The renminbi shed 0.4 per cent versus the dollar.

Rajiv Biswas, chief Asia Pacific economist at IHS Markit, said the outbreak was “particularly concerning just as the Chinese new year season gets under way, with millions of Chinese tourists travelling both within China and to many popular Asian tourist destinations”.

In Hong Kong, consumer-related stocks dropped 2.4 per cent on fears the outbreak could affect spending over the lunar new year. Wharf Real Estate Investment, which operates Hong Kong shopping malls, fell over 3 per cent.

Most people diagnosed with the new coronavirus, which originated in the Chinese city of Wuhan, have shown relatively mild symptoms. But the outbreak has evoked the 2003 Sars virus contagion, which also emerged from China and killed 800 people after officials initially attempted to cover up the epidemic. 

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Mr Biswas said the economic consequences of the virus were “extremely concerning” for Asia-Pacific. “China’s international tourism has boomed, so the risks of a . . . Sars-like virus epidemic spreading globally have become even more severe,” he said. Tourism, airlines and retail stocks were among those likely to be hardest hit.

Jefferies analysts said markets were jittery over concerns the virus would spread to more cities in China and elsewhere. A worst-case scenario — an impact similar to Sars — would hit Hong Kong particularly hard. The 2003 outbreak pummeled the city’s stock market and economy.

“Hong Kong is very small and very compact,” they said. “Any news will impact all consumers significantly and quickly. China is very big, thus at this stage only consumer sentiment in the affected cities is negatively impacted.”

Chinese-listed healthcare stocks rose on the news of human-to-human transmission. Shares in drugmakers Shanghai Shenqi Pharmaceutical and Zhende Medical, as well as several others, all climbed by the daily limit of 10 per cent. 

Citigroup said that while concerns over the outbreak could impact tourism and related industries in China, it was still too early to determine its severity. “At the current stage, we cannot quantify the potential impact and need to monitor the trend during the Chinese new year [holiday],” the banks’ analysts said.