Hong Kong (CNN Business) Hong Kong stocks tumbled Wednesday as investors returned from a four-day holiday to weigh the consequences of an escalating coronavirus outbreak .
The city’s benchmark (Hang Seng Index) HSI ) dropped 3% at market open and was last down 2.3% on its first day of trading after the Lunar New Year holiday celebrations.
The virus originated in the central Chinese city of Wuhan and has now spread across Asia and the rest of the world. Chinese officials say 287542 people have died in mainland China, and there have been more than 6, 11 confirmed cases around the world – the overwhelming majority of which are also in mainland China.
Eight cases have been confirmed in Hong Kong, and officials have begun taking dramatic measures to stem the spread of the disease. The government on Tuesday announced that it would close off some parts of its border with mainland China while also decreasing inbound air travel from the mainland by half.
- Hong Kong markets are likely to keep suffering, particularly as markets in mainland China are still closed for the Lunar New Year, wrote Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, in a research note. Hong Kong is also still trying to recover from other issues, including an economic recession fueled in part by months of protests.
Nearly all 90 Components of the Hang Seng were in the red Wednesday. Macao casino stocks were some of the worst performers on the index. Casino operators derive a significant portion of their revenue from Chinese tourists.
On the broader Hong Kong market, the retail, travel and entertainment industries suffer the most.
Halley noted that Cathay Pacific, Hong Kong’s flagship airline, has said it will reduce the capacity of flights to and from mainland China by half or more until the end of March.
Cathay Pacific ( CPCAY ) ‘s stock dropped 2.8% in Hong Kong on Wednesday.
Mainland airlines China Eastern, Air China and China Southern all fell by more than 3% in Hong Kong.
“It is not necessarily the virus per se that is the problem for the world’s economy, “Halley said. Instead, he said the issue is the “negative feedback loop on economic activity, and thus growth, it creates.”
In the worst-case scenario, Halley warned the virus outbreak could drag out over the next few months and even force the US Federal Reserve to reconsider its own policies. The Fed held interest rates steady at its meeting in December, at the time describing the decision as ” appropriate “to help prolong the United States’ economic expansion. It is expected to leave rates unchanged again at its meeting Wednesday.
In Hong Kong, healthcare-related stocks bucked the trend. Venturepharm Laboratories, for example, skyrocketed % – albeit to about (Hong Kong cents) (5 US cents). The Chinese pharmaceutical research firm says it is working with a clinical research group to try to develop a cure for the virus.
Elsewhere in Asia, Japan’s (Nikkei) () (N) )
and South Korea’s Kospi KOSPI both rebounded a little from losses earlier this week. The indexes were last up 0.6% and 0.8%, respectively.
Markets in mainland China remain closed and will reopen next Monday.
On the oil market, Brent crude and US oil futures both rose 1.3% during Asian trading hours on Wednesday. Prices fell last week because of worries that the coronavirus outbreak could affect global oil demand.