Tuesday 4 February 2020 8:54 am

Asian stocks recover ground even as coronavirus spreads

Asian stocks bounced overnight despite Hong Kong reporting its first death from coronavirus.

The virus – which originated in Wuhan, China – had claimed 425 lives as of yesterday, from 20,400 cases.

Read More: What is the coronavirus and how dangerous is it?

China’s Shanghai stock index climbed 1.3 per cent overnight after plunging 7.9 per cent yesterday, a fall which wiped around $400bn (£309bn) off the index.

Beijing has pumped money into the economy and cut some key interest rates in a bid to contain the economic fallout.

Hong Kong’s Hang Seng index rose 1.2 per cent, Japan’s Nikkei rose 0.5 per cent, and South Korea’s Kospi rose 1.8 per cent.

The cheerier sentiment among investors came in spite of Hong Kong’s first reported death from coronavirus – a 39-year-old man.

Macau, a global centre for gambling, asked all casino operators to shut up shop for a fortnight in a bid to stop the virus from spreading.

Part of the rise in stocks was driven by better-than-expected US factory data, which suggested the “phase one” US-China trade deal will be beneficial to the world’s two largest economies.

Deutsche Bank analysts said they expect the full-year impact of the virus on the Chinese economy to be “limited”.

They said they think “it’ll have a one to 1.75 percentage point impact negatively on China’s first-quarter GDP growth”.

“But assuming some modest catch-up of production and demand in the subsequent quarters of the year, the full-year impact will likely be limited to 0.2 to 0.3 percentage points.”

Senior analyst Mikael Olai Milhoj of Dankse Bank said it was reassuring that the number of cases has appeared to slow, “although uncertainty remains high”.

Read More: Coronavirus: Hong Kong closes 10 of 13 China borders

That said, Danske predicted “a big hit to Chinese growth in the first quarter and PMI [surveys] should nosedive in February”.

“The rest of the world will also feel the impact due to lower Chinese demand and supply-chain disruptions. In particular, a sharp decline in tourism is likely to affect the rest of Asia.”

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