Asian markets were mixed on Tuesday as bargain-buying after the previous day’s bloodbath tempered fears that the coronavirus will develop into a pandemic and hammer the global economy.
News at the weekend that Covid-19 was now spreading and claiming lives far beyond China sparked a flood to safety on trading floors across the world, with the Dow on Wall Street suffering its worst day in two years.
With the death toll surpassing 2,700 and more than 80,000 infected, the World Health Organisation said the outbreak had “peaked” in China but warned that all countries should prepare for a “potential pandemic”.
“As the number of Covid-19 infections outside of China rises, investors are considering the potential ramification on the global economy beyond weaker growth in China and supply chain disruptions,” JP Morgan Asset Management’s Tai Hui said in a note.
“Equity markets will remain volatile in the near term, driven by new infection numbers around the world.”
Tokyo led losses as markets reopened to play catch-up with Monday’s global sell-off.
The Nikkei ended more than three per cent lower, while Sydney and Wellington each shed more than one per cent and Shanghai dipped 0.6 per cent.
There were also losses in Bangkok and Jakarta. The Cambodia Securities Exchange sank 3.94 per cent.
However, Hong Kong added 0.2 per cent, while Seoul jumped 1.2 per cent, having plunged almost four per cent on Monday in reaction to a spurt of infections in South Korea at the weekend.
Singapore added 0.6 per cent, Taipei rose 0.1 per cent and Mumbai put on 0.3 per cent.
“There is no question that financial markets are coming round to the realisation that this particular crisis is likely to have a slightly longer shelf life than many thought was the case a couple of weeks ago,” said CMC Markets UK analyst Michael Hewson in a note.
“However, flu outbreaks are hardly anything new. They happen every year and according to the World Health Organisation, flu kills up to 650,000 a year. Yet markets are reacting to an outbreak that has so far only affected a fraction of that number.”
While the region is suffering another broad retreat, the losses are being tempered by bargain-buying, while reports said a US firm had developed a possible vaccine that had been sent for testing.
Analysts said the recent losses would provide a good buying opportunity as they looked past the virus and contemplated an improving economic outlook.
World markets had been rallying at the start of the year on hopes for global growth in the wake of the Sino-US trade pact and as indicators suggested a slowdown appeared to be bottoming out.
David Wong, an investment strategist at AllianceBernstein in Hong Kong, said: “The benefit of global quantitative easing and the trade war truce should ultimately provide more upside to the global economy than the coronavirus will apply downside risk.”
The return to equity markets also saw gold fall sharply, losing three per cent after hitting a seven-year high on Monday.
Oil prices, which tanked around 3.8 per cent, were also slightly higher, though concern about the impact on demand for the commodity in China – the world’s top crude consumer – was keeping gains subdued.
High-yielding, riskier currencies were also benefitting, with the South Korean won up 0.8 per cent, Australia’s dollar 0.5 per cent higher and the Mexican peso gaining one per cent.