Disneyland and Ocean Park may be closed due to the coronavirus. But Hong Kong stocks have offered their own roller-coaster ride this week.
The Hang Seng Index finished down 2.3 per cent to 26,146.67, with all 50 of its constituents posting losses, following the market rout in the US on concerns about the human and economic costs of the spreading coronavirus epidemic.
The benchmark pulled back up a bit as it neared the close, eking out a teensy weekly gain of 0.06 per cent after declining for the last two consecutive weeks.
This week, Hong Kong’s benchmark was up Monday. Then down Tuesday. Down again Wednesday. Then it shot up Thursday by 2.1 per cent. That was then its biggest daily closing percentage gain in a month.
Global news has roiled markets this week, with headlines on everything from the coronavirus spreading and US markets tanking to the surprise big showing of moderate Joe Biden in the US Democratic “Super Tuesday” primaries to the emergency rate cut by the US Federal Reserve Board. The impact on markets of such headlines is amplified in our “infodemic” age of people feasting on online news and sharing on social media, according to behavioural economist Richard Peterson.
“For experienced investors, they may buy low, sell high. But normal retail investors, may be better to wait and see,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
At one point Friday, the Hang Seng Index fell 2. 6 per cent. Had it not pulled up a bit, it would have been at the magnitude of falls seen on January 30, when it dropped 2.62 per cent. The day before that, it tumbled 2.82 per cent. That was back when the threat of the coronavirus was becoming clearer.
The Shanghai Composite Index closed 1.2 per cent lower to 3,034.51 on Friday.
But it ended with a weekly gain of 5.35 per cent compared to its 5.24 per cent decline the prior week.
Asia-Pacific benchmarks also saw declines.
“Hong Kong and China markets are following the slump of the US market, but volatility is lower, as the fundamentals and sentiment are relatively stable here,” said Alan Li, portfolio manager at Atta Capital.
“If the virus spread in China is still under control and economic activities are back to normal, any adjustment should be a buying opportunity,” Li added, in a more aggressive view than Wen’s cautious advice for non-professionals.
Banks, property and infrastructure are good to accumulate whenever there is retreat, Li added.
In Hong Kong, casino stocks were big losers, with Sands China falling 3.5 per cent to HK$34.70 and Galaxy Entertainment dropping 3.1 per cent to HK$51. (For in-depth coverage of Hong Kong and mainland markets, see the Stocks Blog.)
Wynn Macau fell 2.6 per cent to HK$15.06 while MGM China dropped 3.3 per cent to HK$9.83.
Melco International Development fell 1.1 per cent to HK$15.68, while SJM Holdings fell 2.2 per cent to HK$8.70.
The casinos are waiting for mainlanders to return to the tables after China suspended the visa programme that allows them to visit the world’s biggest gambling town to try to contain the coronavirus.
Meanwhile, Techtronic Industries, one of the world's largest manufacturers of cordless power tools, tumbled 7.4 per cent to HK$62.50. AAC Technologies, which derives half of its revenue from US tech giant Apple, fell 0.9 per cent to HK$52.60.
Internet giant Tencent fell 2.6 per cent to HK$395.80, while Alibaba, the e-commerce titan and owner of the South China Morning Post, declined 1.6 per cent to HK$203.80.
HSBC Holdings fell 2.2 per cent to HK$50.65. An employee from the bank has contracted the coronavirus in China, Reuters reported, citing an internal memo. This follows earlier reports on Thursday when the British bank said a worker in London has tested positive for the coronavirus and evacuated its office.
In the short term, the Hang Seng will trade around 26,000-27,000, analyst Wen predicts.
The previous two weeks have seen zigzagging on the Hang Seng as well, though not as pronounced as this week.
From February 24 to February 28, the benchmark fell three days and rose two, with a 1.8 per cent fall on that Monday and a Friday decline of 2.4 per cent.
From February 17 to 21, three days were down – the most a Tuesday loss of 1.5 per cent – and two saw gains – the biggest was only 0.5 per cent on that week’s Monday.
Gold is looking very attractive in this uncertain global environment, said Stephen Innes, chief Asia market strategist of AXI Trader. Spot gold is trading at US$1,672.63 per ounce, and is up more than 10 per cent for the year.
As US rates likely head towards the zero lower bound, “this should mean that both retail and institutional investors, portfolio allocations in gold will rise exponentially,” Innes said in a new note.
“The economic impact of the coronavirus has always been about fear of the virus,” Innes said. “Fear is an economic problem that has investors focusing again on the dominant narratives in the media cycle, where Covid 19 fears, Covid 19 tip of the iceberg scenario and central bank rate cut scepticism rule the roost.
“Markets have shifted from pricing temporary China weakness to a more protracted global event, which will see a good chunk of global GDP go up in smoke. Of course, this has prompted the charge of the central bank cavalry brigade. Sadly, for supply-side risk and probably for demand-side once quarantines intensify, easy money is not immediately going to get people on a flight to Milan or cruise ships to Venice and visiting St Marks square,” he added.
In China, the CSI 300 gauge of large-caps listed in Shanghai and Shenzhen slipped 1.6 per cent to 4,138.51 at the close.
The ChiNext technology board dropped 0.8 per cent to 2,192.94.
Liquor distiller Kweichow Moutai ended 1.3 per cent lower to 1,155.50 yuan.
Meanwhile, Apple AirPod maker Luxshare Precision Industry rose 0.2 per cent to 45.56 yuan.
In Asia-Pacific markets, Tokyo’s Nikkei 225 declined 2.7 per cent.
Seoul’s Kospi dropped 2.2 per cent and the tech-heavy Kosdaq slid 1.2 per cent.
Australia’s S&P/ASX200 ended 2.8 per cent lower and New Zealand’s S&P/NZX50 dropped 1.9 per cent.
More from South China Morning Post:
- Odds in investors’ favour after coronavirus upends the world’s gambling capital of Macau, analysts say
- Will the coronavirus take a bite out of Apple’s suppliers in China? Traders remain upbeat