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Investors flee amid pandemic fears

Trade of the Day: Stocks and futures trashed; government bonds in across the board rally  

Quote of the Day: “Large outbreaks of COVID-19 in S Korea, Italy and Iran point to the risk of a global pandemic that, if not handled correctly, could swamp hospitals with acute cases. We increasingly find it hard to believe that USA cases are as low as reported, and believe that given the flow of Chinese, Korean and Iranian nationals into North America, a large USA community-based outbreak is increasingly likely. If not managed correctly, this could significantly rattle markets,” said Jefferies analysts in a report titled “Coming to America?”.

Stock of the Day: Lenovo fell as much as 6.5% after Bucephalus Research said, “We suspect revenue and profits will prove to be overstated, making valuation hard” in a report carrying a sell recommendation headlined “Starting to look like fraud.”      

Number of the Day: HK$10,000 (US$1,283). The amount of cash Hong Kong’s government would pay to each citizen to offset the economic fallout of the coronavirus.

Tip of the Day: “We prefer developers with large/high-quality land banks, strong balance sheets and high visibility. Remain positive on property sector as policy environment turns more favorable. Despite the outbreak of COVID-19, we expect developers under our coverage to achieve decent contracted sales growth,” said Nomura analyst Leif Chang in a note. Chang reiterated buy ratings on China Overseas Land, KWG Properties, China Jinmao, Sunac China Holdings, and CIFI Holdings Group.

Investors dumped risky assets as the geographical spread of the coronavirus continued relentlessly with the United States health authorities warning about the pandemic and the WHO alerting countries outside China about outbreaks. “Ultimately, we will see community spread in this country. It is not a matter of if but when this spread will happen,” CDC Director Nancy Messonnier, said at a media briefing. The Centers for Disease Control and Prevention, a US federal agency, is the leading national public health institute of the United States. The WHO also issued a warning that countries around the world need to shift their mindset to preparing for an outbreak of the novel coronavirus and be ready to respond rapidly when it arrives.

The MSCI Asia-Pacific ex-Japan index fell 1.1%, Japan’s Nikkei 225 was down 0.79% and Australia’s S&P ASX 200 index tumbled 2.31%. The Hang Seng index slipped 0.73% as technology, telecoms and healthcare losses brought down the Hong Kong benchmark.

Europe stayed bearish as well with the Stoxx Europe 600 down 1.8%, and Wall Street is set for a weak start with the S&P Futures off 0.6%.

“Countries in Emerging Asia are the most exposed to a collapse in gross trade flows with China. But some developed markets also look vulnerable too. For example, the slump in tourism arrivals to Japan looks set to knock off 0.2% from GDP growth in 2020, while we estimate that Australian exports are likely to fall by at least 3% in February due to virus-related disruption,” said Capital Economics in a note.

Umesh Desai

Umesh Desai is the Executive Editor at Asia Financial. Prior to this he spent over two decades with Reuters News as Asia Pacific Chief Correspondent in Hong Kong and Bureau Chief in Bombay. Before becoming a journalist Umesh was a credit ratings analyst with Moody's arm in India - ICRA. A chartered accountant by training, Umesh began his career as an equity analyst. His Twitter handle is @umesh_desai


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