Hong Kong stocks resumed trading on Wednesday after the break for the Lunar New Year. They got crushed, with the death toll from the new coronavirus now at 132, and more people infected in China than during the SARS outbreak. The Hang Seng Index closed with a 2.8% loss, having broken for the holiday at half-time on Friday.
Markets in the mainland have postponed their resumption from this Friday to Monday, in line with China's decision to lengthen the New Year holiday. But that's a tentative date at best, with the infection count for WARS having rapidly risen by one-third overnight, to 5,974 patients in the mainland.
Those are the official Chinese figures for what Hong Kongers are calling Wuhan Acute Respiratory Syndrome. But there's chaos in mainland hospitals, causing patients to be turned away or give up waiting to see doctors. There's footage circulating of sick people waiting to see a doctor while what appear to be dead people lie covered on gurneys in the hospital hallways. Patients who died early in the outbreak were cremated as quickly as possible, often without testing.
The stock market in Hong Kong may have reopened, but little else in the city is functioning. Civil servants have been told to work from home the rest of the week, and companies are encouraged to tell their employees to do the same. Since the stock market no longer has a physical trading floor, getting digital trading back online isn't too much of a stretch.
The Shanghai government has ordered businesses not to restart operations until Feb. 9, a week later than normal. That will hit foreign manufacturers with operations in the city, such as Tesla (TSLA) , with its new Tesla Giga Factory producing its first China-made cars in December, as well as General Motors (GM) and Volkswagen (VWAGY) .
Companies with factories in Wuhan will see even worse disruption. They include Honda Motor (HMC) , Nissan Motor (NSANY) , Renault (RNLSY) , Peugeot-Citroen (PUGOY) , and the Chinese automakers SAIC Motor SH:600104, Dongfeng Motor Group (DNFGY) and Geely Automobile Holdings (GELYY) .
The SARS outbreak in 2002 and 2003 eventually killed 813 people, according to the World Health Organization, 90% of them in greater China. There were 8,437 cases, including 5,327 in China, meaning WARS has now infected more people in the mainland.
We're still at early days yet, but the 9.6% death rate from SARS is far higher than the 2.2% from WARS. The majority of the WARS deaths have come from elderly patients, often in their 80s, or people who already had another health problem. But the Wuhan pneumonia may prove less deadly but more wide reaching. A key problem is that WARS has a longer incubation period of up to 14 days, during which people are infectious but may not seem sick. SARS patients fell very and evidently ill normally within five days.
The Asian services sector, particularly travel and tourism related stocks, have been hit the hardest so far. Compared with SARS, the impact of WARS may be greater because Chinese travelers have become a far more important force in the last 17 years.
Macau's casino operators are some of the most vulnerable stocks. The city gets around 19 million overnight visitors per year, 72% of them from mainland China, and another 19% from Hong Kong.
Those 91% of arrivals have vanished, leaving Macau a ghost town. Casino operators Galaxy Entertainment (GXYYY) , down 14.7% since January 15, and Melco Resorts & Entertainment (MLCO) , off 19.3% since January 17, both fell 5.2% on Wednesday.
On Wednesday, Hong Kong's flagship airline, Cathay Pacific (CPCAY) , saw its shares fall 3.2%. Cathay and its short-haul subsidiary Cathay Dragon will cut their flights to and from mainland China by 50% or more from Jan. 30 through the end of March.
The airline has suspended normal meals on flights to China, and also won't give out pillows, blankets and magazines. Cattle-class passengers will get a disposable snack bag with a "hot handheld snack." First and business class will have to make do without trolley service, but unlike economy at least they get a meal, on a single tray.
With almost 60 million people in lock down in Hubei Province around Wuhan, passenger numbers are sure to dip in China. The only uptick in flights is from countries evacuating their nationals, with the United States, Japan, Australia and France all orchestrating "rescue" flights.
Thailand is the top international destination for outbound Chinese tourists, accounting for 27.6% of all tourist arrivals. During SARS, tourist arrivals fell 26.5%, so another decline of that magnitude is likely. Thailand has also become more dependent on China for trade and tourism, which now accounts for 11.2% of GDP, up from 5.9% at the time of the SARS outbreak.
Thai air stocks will therefore be under pressure until the outbreak is brought under control. They include Airports of Thailand (AIPUY) , which runs six Thai airports. The stock rose 2.2% on Wednesday but has seen its shares fall 7.3% since mid-January. Asia Aviation BK:AAV operates the budget airline Thai Air Asia, which has suspended flights to Wuhan. The carrier saw its shares fall 3.8% on Wednesday, leaving them down 21.4% so far this year.
Singapore will also be hit hard. Chinese visitors account for 18.5% of total tourists. The city saw visitor numbers plummet 61.9% during SARS, bringing the entire economy temporarily into recession. But after eight months of declining visitor numbers, the figures turned positive in November 2003, and GDP made a quick V-shaped recovery.
Singapore Airlines (SINGY) has been relatively unscathed so far, its shares down only 5.1% since January 15. Yet were it to suffer a 5% fall in passenger numbers, the dip would take it into negative territory for the 2020 year, a Nomura projection shows, also true of Asia Aviation. So far Singapore Airlines has maintained its service but allows cabin crew to wear masks on flights, a move other airlines such as Cathay have also made.
British Airways, a subsidiary of International Consolidated Airlines Group (ICAGY) , has suspended all flights to China, as has Lion Air from Indonesia. They had relatively few flights, but Asia's carriers will be under pressure to curtail service into China until the extent of the outbreak is clear.