Investors scared of deadly virus outbreaks
The FTSE A 50 China stock exchange index fell 1.7% on January 21, showing the largest drop within six months, Forbes reports. A significant decrease was reflected in the value of shares of the consumer market. The renminbi declined by 0.5%.
The reason for the panic on the exchange was the information that the recently found coronavirus has droplet spread. This was announced at a press conference by the expert committee of the Chinese National Health Commission. CMC Markets analyst Margaret Young said the situation is aggravated by the approaching New Year, from January 25 until the end of the holidays, millions of people go to their families in other cities, which makes the situation almost uncontrollable.
According to Bloomberg, investors understand that due to the spread of the virus, people will try to travel less and stay home more often. This means that the shares of airlines, casinos and the film industry will fall.
The panic of traders was reflected in the stock indices of the European market. The decline in quotations of European securities was the strongest in the last three weeks. Shares of airlines fell by almost 2%. The value of securities of companies oriented to the Chinese market also decreased.
Contributors fear that the situation with coronavirus will follow the scenario of SARS, which also began in China in 2002. 774 people died from the disease. These fears hold back the zeal of traders, because previously the stock market of China showed the fastest growth.
After several months of excitement around the Chinese stock exchange, non-residents of China sold $740 million worth of shares by mid-January 21. In addition, many analysts say the market will not recover soon after the fall, given the New Year holidays.
Currently, the number of people infected with coronavirus has reached 291. The disease is also recorded in Thailand, South Korea and Japan. IHS Markit lead economist Rajiv Biswas argues that an outbreak imposes a significant risk to the economy. He also noted that in comparison with 2003, tourism in China has grown sharply, so the risks of large-scale spread of the disease are increasing.