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28 January, 2020 00:00 00 AM / LAST MODIFIED: 27 January, 2020 08:36:16 PM
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Oil and equities sink over fears of economic impact of deadly virus

AFP, Hong Kong
Oil and equities sink over fears of economic impact of deadly virus
A woman walks by an electronic stock board of a securities firm in Tokyo yesterday. Shares tumbled yesterday in the few Asian markets open as China announced sharp increases in the number of people affected in an outbreak of a potentially deadly virus. AP Photo

Fears over the global economic impact of a deadly new SARS-like virus sent oil prices plunging more than two per cent yesterday to extend last week's sell-off, while safe-haven assets including the yen and gold rallied.

As the death toll from the Chinese epidemic jumped to 80 with those affected worldwide approaching 3,000, analysts said there were growing fears the crisis could become as bad as the Severe Acute Respiratory Syndrome (SARS) outbreak that ham-mered Asian markets in 2003.

The outbreak of the coronavirus has led China to lock down the epicentre of the disease, Wuhan -- a city of 11 million people -- while imposing tight travel restrictions on a number of other cities including Beijing.

The move comes during the Lunar New Year holiday when hundreds of millions of people criss-cross the country and spend billions of dollars.

The government decided late Sunday it would extend the holiday and related school closures beyond January 30 end date to "reduce population flows", state media said.

The outbreak has led to the cancellation of festivities, along with temporary closures of Beijing's Forbidden City, Shanghai's Disneyland and a section of the Great Wall.

Stephen Innes at AxiCorp warned the economic shock to China and the world -- just as a growth slowdown appeared to be easing -- could be massive.

"The biggest threat to the global economy is not just because the disease spreads quickly across countries through networks related to global travel," he said in a note.

"But also because any economic shock to China's colossal industrial and consumption engines will spread rapidly to other countries through the increased trade and financial linkages associated with globalisation."

He added: "Unlike 2003 where SARS was less impactful on the developed world market, the rest of the world could feel the pinch this time around."

If the new virus has the same impact on China as SARS, the falls could be worse then projected, Innes said, because consumption is a bigger part of the country's economy and its overall growth trajectory is weaker.

Most regional markets were closed for the Lunar New Year break, but Tokyo was open and fell two per cent. Bangkok plunged nearly three per cent on worries about the Thai travel sector, while Mumbai, Wellington, Manila and Jakarta also suffered losses.

Both main oil contracts tumbled more than two per cent, having dropped more than six per cent last week owing to concerns about the effects on demand in the world's number two economy.

"With ample supply around the world, oil is more vulnerable than most markets to a shock economic growth slow down," said OANDA analyst Jeffrey Halley.

The flight to safety saw the yen rally against the dollar, with the unit now up more than one per cent from eight-month lows touched earlier this year.

However, the greenback rose across the board against higher-yielding, riskier units such as the South Korean won, Thai baht, Indonesian rupiah and Australian dollar. Gold, another go-to asset in times of turmoil and uncertainty, is heading back towards $1,600 and the six-year peaks touched at the start of January.

While the main focus is on the spread of the virus, traders will also be keeping an eye on the release of earnings this week from top companies including Apple, Facebook and Samsung.

 

 

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Editor : M. Shamsur Rahman

Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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