Asian markets take another hit as coronavirus quickly spreads

Published February 26, 2020
The heavy selling, after a day of relative calm caused by bargain-buying, followed another rout on Wall Street. — AFP/File
The heavy selling, after a day of relative calm caused by bargain-buying, followed another rout on Wall Street. — AFP/File

A sea of red washed across Asian markets on Wednesday, with the coronavirus spreading rapidly around the world and health chiefs warning that governments were not prepared for the outbreak.

The heavy selling, after a day of relative calm caused by bargain-buying, followed another rout on Wall Street where all three main indexes lost around three percent after officials said COVID-19 would likely take hold in the United States.

With cases being reported in new countries — and lockdowns in some nations including Austria, Italy and Spain — traders are growing increasingly fearful about the impact on the global economy.

The death toll is now at more than 2,700 while those infected are approaching 80,000 though new cases in China, the epicentre, are falling.

At the World Health Organisation headquarters in Geneva, Bruce Aylward, who headed an international expert mission to China, hailed the drastic quarantine and containment measures taken by the country.

But he told reporters that other nations were "simply not ready" for reining in the outbreak, adding: "You have to be ready to manage this at a larger scale... and it has to be done fast."

The WHO said countries must "prepare for a potential pandemic" — a term used to describe an epidemic that spreads throughout the world.

Tokyo stocks ended the morning down more than one percent, having shed more than three percent Tuesday, while Hong Kong lost 0.8 percent and Shanghai fell 0.2 percent.

Sydney, Seoul and Wellington were all down more than one percent and Manila tumbled more than three percent as it resumed trading after a one-day holiday. Jakarta, Taipei and Singapore were also well down.

'Concern of the unknown'

"It's the concern of the unknown," David Kudla, at Mainstay Capital Management LLC, told Bloomberg TV. "The question is, is the selling getting a bit overdone or is it a more appropriate response to how far coronavirus has spread, and that eventual impact to the economy."

With panicking investors rushing into safe havens, the yield on 30-year US Treasury bills are sitting at record lows, while the Japanese yen climbed and the dollar advanced against high-yielding currencies.

However, the dollar was being kept in check by speculation the Federal Reserve could cut interest rates to support markets, though for now officials are saying the US economy remains in rude health.

Oil prices edged up after three days of steep losses that have wiped about seven percent off both main contracts, though observers warn the virus's spread to the giant US economy could deal it further pain.

The VIX "fear" index is at its highest level in more than a year, though gold, usually a main target for those seeking shelter from the turmoil, was subdued with analysts suggesting this could be down to traders cashing out to cover equity margin calls.

"To suggest the market is a tad skittish over the coronavirus becoming a pandemic could very well be the understatement of the century with the virus morphing into the market's biggest macro worry of the decade," said AxiCorp's Stephen Innes.

Still, Gorilla Trades strategist Ken Berman added: "In light of the quick spreading of the virus, the global economy is likely to suffer, at least, a short-term shock, but should the outbreak slow down during the spring, we could see a swift economic recovery."

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Judiciary’s SOS
Updated 28 Mar, 2024

Judiciary’s SOS

The ball is now in CJP Isa’s court, and he will feel pressure to take action.
Data protection
28 Mar, 2024

Data protection

WHAT do we want? Data protection laws. When do we want them? Immediately. Without delay, if we are to prevent ...
Selling humans
28 Mar, 2024

Selling humans

HUMAN traders feed off economic distress; they peddle promises of a better life to the impoverished who, mired in...
New terror wave
Updated 27 Mar, 2024

New terror wave

The time has come for decisive government action against militancy.
Development costs
27 Mar, 2024

Development costs

A HEFTY escalation of 30pc in the cost of ongoing federal development schemes is one of the many decisions where the...
Aitchison controversy
Updated 27 Mar, 2024

Aitchison controversy

It is hoped that higher authorities realise that politics and nepotism have no place in schools.