Virus worries rattle Asian markets, and the gloom spreads to Europe

HONG KONG • A deadly virus emanating from China helped bring this year's global risk rally to a halt yesterday, hammering sentiment in Asian markets before the gloomy mood spilled over into Europe.

Traders closing out positions in the run-up to the Chinese New Year holiday may have accelerated moves in Asia, where Hong Kong equities slumped 2.8 per cent and the MSCI Asia-Pacific Index dropped more than 1 per cent.

Luxury stocks in Europe, many heavily exposed to the Chinese market, slid on concern that the outbreak will disrupt travel and spending in the key holiday period.

"It is uncertain how the virus outbreak will develop in China during the holidays," said Mr Jackson Wong, asset management director at Amber Hill Capital. "We are holding more cash and we are avoiding travel-related stocks and some technology stocks that had already jumped a lot earlier."

The outbreak is the latest test for global equities, which have notched multiple record highs since the start of the month.

Previous viral episodes like the deadly Sars outbreak spurred a pullback in the S&P 500, although the index rebounded quicker than its Asian equity peers.

Futures for the main US gauge slipped yesterday as Asian markets bore the brunt of concerns. The Hang Seng China Enterprises Index tumbled more than 3 per cent in Hong Kong.

The decline was exacerbated by a Moody's Investor Service downgrade of the city state's rating while China's new top official there urged policymakers to enact national security legislation. The CSI 300 Index of stocks in Shanghai and Shenzhen dropped 1.7 per cent.

In line with other Asian markets, Singapore stocks slid yesterday on mounting worries about the spread of the virus that originated from Wuhan, a city in central China.

The Straits Times Index ended down 32.92 points, or 1 per cent, at 3,247.17, after dropping as much as 1.4 per cent earlier in the day.

The pain was widespread with 350 losing stocks against 138 gainers. Trading was heavy with 2.67 billion securities worth $1.11 billion changing hands.

Airlines, travel and related companies were some of the biggest stock losers in the region. Shares of Singapore Airlines skidded 18 cents, or 2 per cent, to $8.84, while services provider Sats fell 12 cents, or 2.37 per cent, to $4.94.

Some stocks profited from being makers of "protective products".

Malaysia-based rubber glove manufacturer Top Glove, for example, saw its shares jump 12 cents, or 7.55 per cent, to $1.71 in anticipation of higher demand for its products.

Shares of Medtecs International - which makes hospital apparel and disposable personal protective equipment - soared 4 cents, or 76.9 per cent, to 9.2 cents.

"The bigger concern would actually be if it starts to spread to other Asian countries," said Mr Khoon Goh, head of Asia research at Australia and New Zealand Banking Group in Singapore.

"If it is serious enough to impact tourism, then other currencies in the region will be more vulnerable."

BLOOMBERG

• Additional reporting by Ann Williams