Asian shares hold steady as China virus fears persist

With many people around Asia preparing for the Lunar New Year, share prices held steady on Friday despite investors’ fears that a new coronavirus in China could spread faster as millions of people would be travelling over the weeklong holiday.

Markets had steadied overnight, as investors took some solace from the World Health Organization (WHO) labelling the outbreak an emergency for China, where 25 people have died and at least 800 have been infected, but not, as yet, for the rest of the world.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.1 percent, while Japan’s Nikkei fell a marginal 0.05 percent and Australian stocks added 0.3 percent. Hong Kong’s benchmark Hang Seng Index gained 0.15 percent.

Financial markets in mainland China, Taiwan and South Korea were all closed on Friday.

“Investors are worried that the outbreak of coronavirus will dampen consumption in China when the Chinese economy has been already cooling down,” said Yasuo Sakuma, chief investment officer at Libra Investments.

Indeed, National Australia Bank’s research team tentatively estimated China’s gross domestic product (GDP) growth for the first quarter could be hit by approximately 1 percentage point by the latest deadly coronavirus outbreak.

“The impact on Chinese growth could be significant given the outbreak coincides with the Chinese New Year,” said Tapas Strickland, NAB’s director of economics.

“Measures to isolate the outbreak has meant 26 million people in cities or near urban areas are in lockdown or have limited travel. New Year festivities are also curbed in Beijing and Macau.”

The stance taken by WHO over epidemic provided enough relief for US markets to advance further.

The Nasdaq Composite rose 0.2 percent to a record closing high, while the S&P 500 added 0.1 percent and the Dow Jones Industrial Average eased 0.1 percent.

“So far, reports of the fatalities show them to be largely amongst the elderly, and those with pre-existing chronic conditions,” Robert Carnell, chief economist and head of research for the Asia-Pacific region at Dutch bank ING said in an emailed note.

“That doesn’t mean there won’t be an economic or market response to this. But it does suggest that the response will be manageable, and hopefully fairly short-lived, weeks and months, not quarters or years,” he added.

In the currency market, the concerns about the virus supported the safe-haven yen.

The Japanese currency traded at 109.47 per dollar, having risen to a two-week high of 109.26 yen on Thursday.

The euro fell to a seven-week low versus the dollar of $1.1036 overnight after the European Central Bank left its policy rates unchanged but President Christine Lagarde struck a slightly dovish tone than some had expected.

The common currency last stood at $1.1053, down a marginal 0.05 percent on the day.

The offshore yuan softened to 6.932 per dollar, a day after hitting a two and a half weeks low of 6.942 yuan.

Coronavirus fears continued to weigh on commodity prices.

Oil prices remained under pressure on the growing concern that fuel demand will weaken as the spread of a respiratory virus from China dents travel and darkens the economic outlook.

Brent crude futures shed as much as 0.16 percent to below $62 a barrel in early Asian trade on Friday, its lowest since December 4, after falling 1.9 percent in the previous session.

US West Texas Intermediate (WTI) futures declined as much as 0.22 percent to $55.47 and were on course for a 5 percent fall for the week.

Elsewhere, copper prices fell to their lowest in more than six weeks overnight.