Via Financial Times

The effects of the coronavirus crisis became clearer this week as pictures of overstretched Chinese health workers clogged newsfeeds, sending Asian stock markets into a spiral.

The virus, from a family that includes the common cold and Sars, has claimed 213 lives in China from about 10,000 confirmed cases. Its spread overseas prompted the World Health Organization to declare a global emergency.

Hong Kong’s Hang Seng index, the first Chinese market to reopen following the lunar new year long weekend, fell as much as 3 per cent on Wednesday and finished the week down 6 per cent. Shanghai and Shenzhen’s stock markets remain closed after Chinese authorities extended the holiday into next week.

While market moves cannot be solely attributed to the virus, the sell-off in Chinese stocks this week relative to other markets highlights investor concerns about the government’s ability to contain the outbreak, which are likely to weigh on its already slowing economy.

Chart showing that  the sell-off in Chinese stocks this week relative to other markets, has shown that investors are concerned about the government’s ability to contain the coronavirus outbreak which could hold back its already slowing economy

Consultancy Capital Economics noted on Friday that “many factories and other workplaces have been closed indefinitely” — something that “did not happen on a large scale during Sars. If closures continue, the impact will spread through supply chains, threatening job losses and prolonged weakness”.

China’s mining stocks were severely hit. But so were companies exposed to travel and leisure as authorities restricted movement between cities to curb the spread of the virus. China Southern Airlines fell 7 per cent, while Luckin Coffee has lost more than 10 per cent in the past week as fears mount over a drop in tourism.

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Rating agency Fitch warned of a “significant” impact on Macau gaming operators, although it said the larger companies with a presence in the world’s biggest gambling hub should be able to withstand some of the pressure.

Shares in other companies reliant on high-spending Chinese tourists also dropped. South Korea’s AmorePacific, maker of cosmetic brands such as Laneige, closed the week down 11.5 per cent.

Other international stocks with exposure to China suffered less serious damage. Large German carmakers, which Evercore ISI estimates make at least a third of their pre-tax profits in China, fell about 4 per cent. Japanese rivals Toyota and Honda suffered similar falls.

The world will be hoping the outbreak levels out — but panic could yet return on Monday when mainland China resumes trading.