about 4 years ago • 2 mins
Stock markets’ 2020 rally spluttered to a halt on Tuesday after Chinese authorities confirmed a deadly disease had been transmitted between humans for the first time – and new outbreaks appeared overseas 😷
The respiratory “coronavirus” currently gripping Wuhan, China’s sixth-largest city, is growing both more dangerous and more widespread. 308 people have been infected there, of whom six have died. Further cases have cropped up in Thailand, Taiwan, and South Korea – with worries Australia may be next.
Wuhan’s travel hubs are on lockdown in a bid to curb contagion, and further travel restrictions may follow elsewhere. For Finimizers old enough to remember, that conjures up echoes of the SARS epidemic of 2003 – a similar virus also emanating from China. Not only did SARS kill 800 people, but the disruption of such a large-scale public health emergency reduced Chinese economic growth by 0.8% and hit stock markets worldwide.
Professional investors certainly are old enough to remember SARS' impact – which may be why they’re selling off stocks… 😰
Hong Kong shares fell 3% overall on Tuesday – admittedly compounded by a major ratings agency reducing the region’s creditworthiness – and mainland Chinese stocks lost 2%. The impact extended beyond Asia, with European and US markets initially dipping before recovering most of their losses.
As with SARS, fear of catching this coronavirus is particularly likely to put consumers off travel, tourism, and hospitality – hitting companies’ profits in those sectors. Indeed, shares of luxury goods makers such as LVMH and Kering (which rely heavily on happy Chinese shoppers for success, especially with Lunar New Year approaching) fell heavily on Tuesday 🤒
There were some winners, however. As well as super-safe US government bonds seeing their prices rise on Tuesday (and their yields fall – remember, the two move inversely), shares of Chinese pharmaceutical companies poised to tackle any pandemic rose by their daily maximum limit of 10%...
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