Contagious recession: news of an unknown virus in China collapses Asian stock markets

On Tuesday, January 21, trading in the Asian stock market closed with a sharp decline in quotations. The Shanghai Stock Exchange Index SSE Composite slipped 1.41% to 3,052 points, while Hong Kong's Hang Seng index immediately sank 2.81% to 27,985 points. Both indicators have reached minimum values ​​since the beginning of 2020.

A massive sale of securities was observed on trading floors in Japan, Singapore and South Korea. According to experts, one of the main causes of panic among financial players was the news of the death of several people infected with a new virus in China.

It is curious that Asian indices from an impressive fall restrained the growth of shares of pharmacological companies, said Gaydar Hasanov, an expert at International Financial Center.

“Four sick people died, and dozens more were hospitalized. Investors are worried, so the quotes of large companies have fallen markedly. The tourism sector, as well as the shares of airports in Asian countries, were hit, ”said Artyom Deev, head of the AMarkets analytical department, to RT.

At the end of December 2019, authorities in the Chinese city of Wuhan reported an outbreak of pneumonia of unknown origin. January 9, the Central Television of China with reference to a group of specialists called the cause of the disease a new type of coronavirus. At that time, 15 confirmed cases of infection were detected.

To date, cases have already been reported in Beijing, Shanghai and other major cities of the country. At the same time, the official number of infected people increased to 291 people, and another 922 people are under medical supervision. This was reported on Tuesday by the Central Television of the PRC with reference to the State Committee on Hygiene and Health Care of the country.

The virus has already begun to spread outside of China. According to the authorities of the PRC, cases of the disease are recorded in Japan, Thailand and South Korea. At the same time, several people were hospitalized on suspicion of pneumonia in Singapore. This is stated on the website of the Ministry of Health of the Republic.

“Investors remember the SARS that raged in Southeast Asia in 2002-2003. Then the total economic damage amounted to $ 59 billion. For example, Hong Kong lost about $ 12 billion or 7.6% of its GDP, ”Mikhail Kogan, head of the analytical research department of the Higher School of Financial Management, recalled in a conversation with RT.

Today, the situation is complicated by the approach of the New Year on the lunar calendar. Mass celebrations in Asia will begin on January 25 and will last several weeks. At this time, the vacation period starts and the tourist flow increases. According to the South China Morning Post, in 2019, the number of trips inside China during the celebrations amounted to about 3 billion.

Aggravation of the situation runs the risk of restricting the work of government institutions in China. As a result, the decline in stock markets may further intensify. This point of view in a conversation with RT was expressed by Ilya Grigoriev, an analyst with the debt market of IK Oriole Capital. According to the expert, a further increase in the number of cases runs the risk of restricting agricultural trade.

“If the disease continues to spread, the main factor in stock market fluctuations may be restrictions on the movement of agricultural goods both within China and between Asia-Pacific countries. In this case, the problems may affect the medium-term macroeconomic indicators, and later on the general state of the stock market of Asian countries, ”Grigoryev added.

In the near future, investors will closely monitor the outcome of an emergency meeting of the World Health Organization. According to the UN, on January 22, participants in the meeting will discuss "whether the outbreak is a public health emergency of international concern."

“Investors will reduce risks and transfer money to defensive assets such as gold. Until there is official information from China about a developed vaccine that will stop the spread of the virus, the situation will remain tense, ”said Gaidar Hasanov.