SINGAPORE (ICIS)--Shares of China’s petrochemical majors plunged in Hong Kong on Wednesday on escalating worries about the long-term impact of the coronavirus outbreak on the world’s second-largest economy.
Other bourses in Asia gained on Wednesday, tracking the rise in US stock markets overnight, which rebounded from the worst sell-off in four months as investors shook off immediate concerns of the Wuhan virus.
At 03:45 GMT, Chinese petrochemical major Sinopec Shanghai Petrochemical Co slumped by 5.07% in Hong Kong, while PetroChina Co was 4.29% lower. CNOOC Ltd fell by 4.29% and China Petroleum & Chemical Corp was down by 3.57%.
The Korea Stock Exchange KOSPI Index was up by 0.65% while Japan's benchmark Nikkei 225 inched up by 0.47%.
China, Taiwan and Vietnam markets remain closed for Lunar New Year holidays.
China's State Council announced on 27 January that the Lunar New Year holiday will be extended to 2 February. The original week-long holiday in the country was from 24-30 January.
Hong Kong chief executive Carrie Lam on 25 January declared a virus emergency in the city, cancelling all official visits to mainland China.
Confirmed cases of the Wuhan virus have reached 5,496 in mainland China, health authorities said on Wednesday.
The epidemic is being compared with the Severe Acute Respiratory Syndrome (SARS), which broke out in southern China between November 2002 and July 2003.
The new strain of coronavirus or 2019-nCoV belongs to the same coronavirus family as SARS, and is believed to have originated from China’s central city of Wuhan, the capital of Hubei province.
China’s death toll has climbed to 131, with 840 new cases recorded in Hubei on Wednesday. There were also reported cases of infections in various countries in Asia, and as far as Canada and the US.
The World Health Organization (WHO)’s director general is reportedly in China to meet with government and health officials. The WHO has previously decided against declaring the coronavirus in China a public health emergency of international concern.
“The foremost risk around the coronavirus infections in and outside China is human health related and borne by those exposed to infection,” said Atsi Sheth, the managing director of credit rating firm Moody’s Investors Service.
“Should the incidence of infections escalate, it could also have economic consequences, as the SARS epidemic of 2003 demonstrated. The fear of contagion could dampen consumer demand, and affect tourism, travel, trade and services in affected countries. The burden on health care sectors in affected countries would also potentially increase,” Sheth said.
China recorded its weakest economic growth since 1991 at 6.1% in 2019, down from 6.7% in 2018, as the country’s manufacturing sector was severely hit by the country’s prolonged trade war with the US.
The spread of the Wuhan coronavirus may hit China’s services sector badly and weigh on production and investment, especially for some provinces and regions, with more outbreaks of the Wuhan coronavirus and heavy reliance on migrant workers, according to Japan-based Nomura Global Markets Research.
“We believe the negative impact of the Wuhan coronavirus outbreak on China’s economy should not be understated, though it is quite difficult to gauge at this stage because of much uncertainty,” it said.
Unlike the SARS in 2002-2003, when China’s growth was in an uptrend driven by strong exports and capital inflows, there are more growth headwinds in 2020, especially from the cooling property sector and worsening fiscal conditions, Nomura said.
“The Wuhan coronavirus has just become another downside risk to the economy. As the coronavirus outbreak is adding to existing growth headwinds, China’s economic outlook in 2020 has become more uncertain. The recent signs of stabilisation could fade quickly if the situation with the coronavirus continues to worse,” it added.
Focus article by Nurluqman Suratman
Additional reporting by Izham Ahmad
Photo: Chinese Premier Li Keqiang with front-line medical workers at Wuhan Jinyintan Hospital, to inspect and direct the efforts for the prevention and control of the novel coronavirus outbreak. (By CHINE NOUVELLE/SIPA/Shutterstock)