Chinese shares lead Asian decline as fears mount over Wuhan virus

Chinese stocks led a decline in Asian shares on Thursday as investors remained anxious about the spread of a new flu-like virus from China, with more deaths reported just as millions prepared to travel for the Lunar New Year.

Crude oil futures tumbled to seven-week lows as the contagion was expected to hit air travel, while the International Energy Agency’s warning of an oil surplus and a larger-than-expected increase in US crude inventories rekindled fears of excess supply.

China’s benchmark CSI300 Index slid about 2 percent, with the Chinese yuan currency falling towards a two-week low.

Stocks linked to the Chinese city of Wuhan, which is at the centre of the outbreak, recorded the worst losses. Wuhan Department Store Group Co, which operates several malls, lost 3.1 percent to head for a weekly drop of 16 percent. Hubei Heyuan Gas Co, which generates all of its revenue from Hubei province of which Wuhan is the capital, extended its two-day drop to 10 percent, the biggest on record.

In Japan, shares were down 0.5 percent while Hong Kong’s Hang Seng Index slid 1.4 percent. Stock market indexes in South Korea and Australia also declined 0.8 percent and 0.7 percent, respectively.

Investors flocked instead to safe-haven currencies such as the Japanese yen, gold and US Treasury bonds, as China imposed a travel blockade on Wuhan.

Deaths in China attributed to the new coronavirus rose to 17 on Wednesday, with nearly 600 cases confirmed. The outbreak has evoked memories of severe acute respiratory syndrome (SARS) in 2002-03, another coronavirus which broke out in China and killed nearly 800 people in a global pandemic.

“Markets are expressing concern about the growth outlook,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The coronavirus has introduced some caution. There is no reason to expect a global pandemic now, but there is some repricing in financial markets.”

US stock futures in Asia were flat on Thursday.

The S&P 500 eked out a 0.03 percent gain on Wednesday, but the overall tone on Wall Street was mixed as investors assessed the effects of the virus and braced for the corporate earnings season.

Cases have been detected in Beijing, Shanghai, Macau, Hong Kong, Japan and the US. Wuhan’s local government issued a travel ban, essentially locking down a city of 11 million as it urged citizens not to leave the city. The local government said it would close all urban transport networks and suspend outgoing flights as of 10am on Thursday (02:00 GMT).

However, there are fears the virus could spread rapidly, because millions of Chinese travel domestically and abroad during the weeklong Lunar New Year holidays, which start on Friday. Taiwan’s China Airlines suspended flights to Wuhan on Thursday and Singaporean budget carrier Scoot suspended a daily flight to the city.

Air China, China’s flagship carrier, skidded 2.78 percent to the lowest in more than eight weeks. Shares of Australia’s Qantas Airways Ltd fell 1.55 percent, while Japan Airlines Co dropped 1.4 percent and rival air carrier ANA Holdings Inc declined 1.17 percent.

In the onshore market, the yuan edged down 0.1 percent to 6.9160 per dollar, approaching the lowest since January 10.

The yen rose 0.2 percent to 109.64 versus the dollar, while the Swiss franc traded at 0.9679 against the greenback.

Gold, another asset that is often bought as a safe haven, rose 0.07 percent to $1,559.17 per ounce.

The yield on benchmark 10-year Treasury notes fell slightly to 1.7551 percent in Asia as some investors sought the safety of government debt.

US crude fell 1.69 percent to $55.78 a barrel, briefly touching the lowest since December 3. Brent crude slumped by 1.55 percent to $62.26 per barrel to reach the lowest since December 4.