Markets Insight
No let-up in market malaise over Wuhan virus outbreak
As sentiment sours, observers expect more pain before relief in the coming weeks
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Medical staff in protective clothing at the Wuhan Red Cross Hospital in Wuhan last Saturday. Fears that the Wuhan virus could spread further sent Chinese stock markets plunging to their worst pre-Chinese New Year close on record, noted a market analyst. Even Wall Street fell foul to virus worries, with the three major stock market indexes posting losses last Friday.
PHOTO: AGENCE FRANCE-PRESSE
Navin Sregantan
The shorter trading week ahead due to the Chinese New Year holiday will do nothing to reduce the level of uncertainty among investors that is quickly souring market sentiment.
Top on investors' minds is the fear of contagion from the Wuhan coronavirus, which has killed over 40 people in China and infected more than 1,300, including at least four in Singapore.
The flare-up has dented recent equity market rallies fuelled by a recovering global economy, the trade deal resolution and accommodative central bank policies.
Fears that the virus could spread further sent Chinese stock markets plunging to their worst pre-Chinese New Year close on record, noted Oanda Asia-Pacific senior market analyst Jeffrey Halley.
Singapore's Straits Times Index (STI) fell 41.01 points, or 1.3 per cent, last week to finish at 3,240.02.
Even Wall Street, which for most of last week preferred to focus on strong earnings by United States corporates and the global economic recovery, fell foul to virus worries.
The Dow Jones Industrial Average finished 0.6 per cent lower at 28,989.73 last Friday, while the S&P 500 dropped 0.9 per cent to 3,295.47, and the Nasdaq shed 0.9 per cent to 9,314.91.
Observers expect more pain before relief in the coming weeks.
FXTM market analyst Han Tan said "regional markets could see an outsized reaction when trading resumes, should pent-up concerns be unleashed if the virus' spread worsens drastically over the near term".
The number of Wuhan cases is likely to escalate in the weeks ahead, given that the virus outbreak is still at an early stage, noted Mr Eli Lee, Bank of Singapore's head of investment strategy.
He cited the severe acute respiratory syndrome (Sars) outbreak in 2003 and noted that markets "hit bottom when the rate of infection peaked, before staging a sharp recovery as the number of new cases began to stabilise". This, he added, suggests the recent price correction "is ultimately one to buy, but it is now too early to buy broadly on dips".
Mr Tan believes that once investor fears "thin out", positive catalysts like robust US corporate earnings or macro data can "punch through meaningfully in the markets".
While the Singapore market is closed today, the earnings season continues to pick up, with the focus still on real estate investment trusts (Reits) and property trusts.
A number will report results for the October-December quarter, including the STI's Ascendas Reit, which announces third-quarter earnings on Friday.
Starhill Global Reit releases results on Wednesday, with Ascott Residence Trust, CDL Hospitality Trusts and OUE Commercial Reit following on Thursday.
The main local data print for the week will be Thursday's fourth-quarter unemployment figures.
