CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Hang Seng Index re-opens at three-week low as virus spreads

Celebrations are muted on the Hong Kong benchmark this year, as the market re-opened at a three-week low.

Red packet amounts are going to be slim this year, as the Hang Seng Index has just recorded its worst post-Lunar New Year price since 2016.

On Wednesday 29 January, the benchmark re-opened at 27,101, 3% below its closing price before it closed for celebrations on 24 January.

All 50 constituents spanning the finance, utilities, property, and commerce sectors made negative contributions to the overall index on the day.

The last time the index fell that much on re-opening was in 2016 – the customary ‘Year of the Monkey’ – when it fell 3.6% post-break.

Market sentiment weakens as coronavirus fears strengthen

The Hong Kong market’s lack of confidence was an expected reaction to the Wuhan coronavirus. So far, the contagion has already claimed over 130 lives alongside more than 9,000 suspected cases.

On Tuesday 28 January, Asian markets that were closed for the Lunar New Year – including South Korea’s KOSPI and Thailand’s SET Index – also re-opened 3.17% and 2.9% lower respectively.

Regional stock markets should brace themselves for what could be a volatile couple of weeks. According to IG Asia Market Strategist Pan Jingyi, based on the experience of the SARS coronavirus in 2003, Asia could ‘see impact linger for a longer duration than the west going by the current state of the virus spread’.

The Hong Kong benchmark has not been able to catch a break this year, with political tensions ever running in the background, and a recent credit rating downgrade from US investment research agency Moody’s Investors Service. The HSI is down as much as 3.95% this year.

Share prices down across the board

Unsurprisingly, travel and tourism stocks, which were first to be affected by news of the virus outbreak, drove most of the downward pressure on Wednesday.

Hong Kong-listed equities of airlines and casinos took a massive hit. China Eastern Airlines plunged 3.43%, while China Southern Airlines dropped 3.65%. Casinos Wynn Macau and Melco International Development shed 4.11% and 5.18% respectively.

Financial services and property firms were not spared from the panic selling either. Life insurer AIA declined 2.65% and China Life Insurance dropped 3.59%. On the property front, CK Asset Holdings, China Overseas Land, and Henderson Land each lost 5%, 3.9%, and 2.7% in early trade.

Of course, the market’s immediate concern is for the virus to be contained, and investor sentiment to recover. But as Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a media note on Wednesday, ‘rising infection and casualty count into the day and over the next few days and weeks’ will likely ‘strain some of the relief moves we have seen overnight’.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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