Sometimes I wonder what I'm doing wrong. Here I sit in Hong Kong, son of a South African dad and English mum. Where was the new Omicron variant of COVID-19 first detected? South Africa. Where did the first traveler out of Africa test positive? Hong Kong.
It's a coincidental confluence of currents. Omicron is quickly being discovered the world over, apparently due to travel from South Africa. Once more the world is shutting down, locking borders, imposing restrictions that we know all too well. Here we go again...
Will markets sell off as harshly as they did in March 2020, when COVID first swept the world? It looked like they might on Friday, when equities sold off hard and currencies were in flux.
On Monday, U.S. traders will see markets a little more level-headed as they return to their terminals full of Thanksgiving turkey. Shares in Asia are down, but not all that much today. There are losses on Omicron's back, but so far they are contained.
The South African rand weakened 2.9% in the 48 hours between November 24, the day that Omicron was reported to the World Health Organization, and November 26, when the WHO dubbed it a "variant of concern." But the South African currency has stabilized and in fact is 1.0% stronger on Monday.
The Topix stock benchmark in Tokyo closed down 1.0% in Monday trade, resulting in a 3.9% slide since Friday. Hong Kong's Hang Seng benchmark is also off 1.0% at the close, and down a similar 3.6% since Thursday's close. In Australia, the S&P/ASX 200 fell 0.3% on Monday, down 2.2% since the end of trade Thursday. Singapore has also sold off 1.3% today for a 3.0% two-day trading loss.
Weakness, but hardly panicky fire-sale pricing. You wouldn't want to be running an airline, that's for sure. Cathay Pacific (HK:0293) (CPCAF) , the Hong Kong flagship carrier, has seen its shares slide 3.7% on Monday and 7.8% when you factor in Friday's fall. Singapore Airlines (SG:C6L) (SINGF) is down 2.8% today and 6.5% in two trading days. Gambling stocks were also hit hard in Hong Kong, not only because of the impact on tourism, as I'll explain later.
One reason for the measured selloff in Asia today is that anecdotal reports suggest symptoms in South Africa are not severe, with the new variant already rampant in Gauteng Province around Johannesburg, the beating heart of South African commerce. Experts expect the vaccines will offer some degree of protection against getting a bad case of COVID.
The chairperson of the South African Medical Association, Angelique Coetzee, says the patients she has seen so far who present with Omicron have different symptoms from the Delta variant, but ones that are "very mild."
She noticed on November 18 that seven patients came to her clinic with an odd form of COVID. One reported being "extremely fatigued" for two days, with body aches and a headache, she tells Reuters.
Since there hadn't been any Delta patients in her clinic for a couple of months, she decided to test for COVID. When more patients came in with similar symptoms - severe fatigue for a couple of days, body aches and a headache - she realized there was "something else going on," she says. There have been two to three patients per day since then with similar symptoms. Unlike Delta, people aren't reporting that they lose their sense of taste or smell.
"Most of them are seeing very, very mild symptoms and none of them so far have admitted patients to surgeries," she says, noting that oxygen levels don't seem to drop significantly. "We have been able to treat these patients conservatively at home."
It is early days yet, and worrying that Omicron has 32 mutations to its spike protein, the part it uses to infect host cells and evade defenses. South African doctors are reporting breakthrough infections of vaccinated people, and even COVID reinfections. But our T-cell defenses target the whole virus, not just the spike. The WHO says it will take "days to several weeks" to work out how severe or transmissible the new variant is.
New variants of flu come along every year. It's interesting to think that different forms of COVID outcompete each other. Delta has had its turn, and maybe Omicron is the next evolution. It doesn't mean it is worse.
Here in Hong Kong, it made me chuckle that the WHO skipped a couple of letters in the Greek alphabet before settling on Omicron as the name of the new variant.
Nu was judged too confusing. Aren't all the new variants nu?
Xi wouldn't fly either. It "was not used because it is a common last name," a WHO spokesman insisted.
Actually, it's held by 0.01% of the Han Chinese population, so not common at all, and 332 out of the 400 most-common names cited in the Hundred Family Surnames Chinese classical text. But it is, of course, held by the highest-profile Chinese national of all, President Xi Jinping.
It is exceptionally hard to say anything with authority when we get a new variant like this. COVID is a moving target, and I've been wrong, very wrong, several times. I never thought we would get a working vaccine; it seemed crazy to me when I originally estimated that the United States would suffer 330,000 fatalities if COVID acted anything like SARS. We're now at 777,390 U.S. deaths out of 5.2 million fatalities globally, and still counting.
Hong Kong and China are going to be badly affected not so much by the new variant but by the efforts to stamp it out. We have the world's harshest quarantine rules here in Hong Kong: three weeks in an expensive quarantine hotel, at your own expense, after travel to 32 "high-risk" nations, including the United States, the United Kingdom and South Africa.
I have not traveled out of Hong Kong for two years. And now it looks like I will not be going anywhere for another year. China will host the Winter Olympics in February, has an important annual Communist Party meeting in March, and a once-in-five-years super summit in November. Xi, the "Emperor for Life," will certainly be re-elected to an unprecedented third five-year term. It all means China will likely not relax its zero-COVID approach - impractical and destined to fail now COVID is endemic - until next November. Hong Kong, desperate to open the mainland border, must stick to the same mainland rules.
Bad news for Asian travel, and travel-linked stocks, since Chinese visitors dominate most markets. Bad news for 1.4 billion Chinese who want to go abroad. Bad news for the 7.4 million residents stuck in Hong Kong. And bad news for little old me. My 80-year-old parents go through that milestone alone, and haven't hugged their grandkids in two years.
Gambling stocks in Hong Kong were hit today not only by the prospect of travel shutting down again but also by the arrest in Macau of Alvin Chau, the operator of Suncity Group Holdings. Suncity is a "junket operator," meaning it brings big-money gamblers to the city, arranging chips, sorting out private-room access and collecting debts. It's illegal to solicit gambling in mainland China, and the authorities say he is suspected of running a cross-border gambling syndicate to get Chinese citizens to gamble abroad - basically, the junket operator's entire premise.
Chau's arrest could therefore crush the VIP gambling market in Macau. Melco International (HK:0200) is down 7.5% in Hong Kong today, suggesting a future fall for its U.S. listing Melco Resorts & Entertainment (MLCO) . Wynn Macau (HK:1128) (WYNMF) fell 7.8% in Hong Kong, with Sands China (HK:1928) (SCHYF) down 5.3%.
Let's hope Omicron is understood quickly, and the world can continue its gradual re-opening. Asian borders are closing fast again, and there's risk of government overreaction. Investors should avoid the same mistake.