Seoul likes to project itself as a place where foreigners are welcome, but the reality can be different. Photo: AFP / Ed Jones

Trade of the Day: South Korean stocks lead Asian sell-off; gold, US Treasuries and yen gain on safety bid.

Quote of the Day: “Given the strong policy responses from the Chinese governments so far, the current period of uncertainty could be shorter compared to the SARS outbreak in 2003 when it lasted for about five months,” said Fullerton Fund Management analysts in a note.

Stock of the Day:    ZTE Corpn jumped as much as 11.25% after it launched a compact and intelligent IPRAN (IP Radio Access Network) access device for 5G. ZTE said this makes the unit especially suitable for scenarios where equipment room space is small and the power supply is insufficient, helping operators deploy 5G transport networks efficiently at low cost.        

Number of the Day: 1.4% – Norwegian sovereign wealth fund Norges Bank Investment Management’s equity holdings equate, on average, to a 1.4% stake in every listed company globally. It has $1.2 trillion in assets, making it the biggest sovereign wealth fund globally. 

Tip of the Day: China property remains on Jefferies & Co analysts’ buy list. “We continue to suggest over-weighting the sector, and expect the upcoming decent FY19F results (~25% earnings growth on average), and more city-level relaxations to provide good support to the sector. In particular, we expect Sunac and Aoyuan to issue positive profit alerts in the coming weeks,” said Stephen Cheung and Calvin Leung in a report published on Monday. “Our top picks remain CIFI, Sunac, KWG and SCE,” they said with the target price implying a 20%-50% gain from current levels.

Financial markets were rattled by the relentless surge in infection numbers as the Covid-19 virus threatened to cause greater damage to the global economy than previously thought. The MSCI Asia Pacific ex-Japan index tumbled 2.15%, Japan’s benchmark Nikkei index edged down 0.39% and the S&P ASX 200 benchmark slid 2.25%. Hong Kong’s Hang Seng index slumped 1.8% as property, technology and energy logged hefty losses.

South Korea, where the infections count has vaulted to over 800 – the highest outside China – saw its Kospi benchmark hammered down 3.87%. The country has pledged money from its existing reserve funds – 3.4 trillion won (US$2.8 billion) –for relief.  President Moon Jae-in suggested that his government may consider an emergency supplementary budget plan to support its “dual” fight against the novel coronavirus and its economic impact.

Resumption of economic activity in China remains a focal point for investors as workers make their way back to factories after the New Year holiday break.

“The longer the covid-19 outbreak curtails China’s factory output, the bigger the risk of disruption elsewhere. The country’s share of global manufacturing value added has risen from 9% in 2005 to 28% in 2017. If factory work does not spike in the coming weeks, a global parts shortage would likely emerge,” said DBS economists in a note warning that even countries with no covid-19 cases could soon begin to feel the impact on tourism and trade.”

In Europe the Stoxx Europe 600 Index plunged 2.3% with Italy emerging as it became the center of the outbreak in Europe and the S&P Futures are down 1.9%, indicating a weak start for Wall Street.

“The pace of the spread of infections of the coronavirus outside of China has caused the financial markets to drop dramatically today, with the FTSE falling over 3%. This renewed fear is due to the spread of the virus outside of China with South Korea and Italy being the latest countries to report a surge in people infected,” said Chris Towner, director at Chatham Financial, an independent financial risk management advisory and technology firm.

 “This latest news has caused markets to start to price in the risk that the coronavirus reaches a point where new infections no longer come from Chinese nationals. It makes the virus far harder to contain and if the spread continues more broadly across the globe, then trade and travel are bound to be further impacted.”

Umesh Desai is Asia Times Finance Editor. Prior to his current role he was at Reuters for 19 years before which he was a credit ratings and equity research analyst. A chartered accountant by training, he is based in Hong Kong.