HONG KONG - The Wuhan coronavirus will test Hong Kong’s stock market resilience. An epidemic could do serious damage in the financial centre, already rattled by months of political unrest. Though the earlier protest-related tourism tumble may prove a blessing in disguise, anti-Beijing public sentiment is also complicating the response.

Hong Kong Chief Executive Carrie Lam seemed to catch a small break as violent demonstrations showed signs of cooling off in 2020. She has now been forced to rush back from Davos to confront the so-called 2019-nCoV strain, which has stoked fears of a repeat of the health and wealth devastation caused by the 2003 SARS epidemic.

Investors have shown patience with Hong Kong’s political ructions, although values took a hit. The Hang Seng Index is down over 3% year-to-date, and the average share price stands at 11 times anticipated earnings for the coming 12 months, according to Refinitiv data, compared to 18 times for the S&P 500 Index. But SARS knocked about 17% off the Hang Seng Index from the time it was uncovered in mainland China, and it decimated the real estate market.

This time around shareholders have taken developments in stride. Benchmark stocks are down only 9% from an April peak, including a 3% fall on Wednesday, the first day of trade after the lunar new year holiday celebration.

The special administrative region’s hard border makes it easier to control inbound flows, with infrared cameras for interdicting feverish travellers. The falloff in Chinese shoppers may have reduced transmission, too. Despite nearly 6,000 cases on the mainland, so far there are no more than eight reported in Hong Kong.

Poisonous politics makes for bitter medicine, though. Lam tried offering non-residents in Hong Kong free treatment for the virus, but the plan was shelved when locals reacted with rage, worried infected mainlanders would flood hospitals. Quarantine policy seems muddled too: people from Hubei province, the viral epicentre, are not welcome, but Hongkongers who travelled there can return, as can visitors from other parts of China. Demonstrators firebombed an empty building designated for quarantine. The outbreak may have created a fresh rallying point for protesters.

Investors could be wise to wait out panic. But this weakened Hong Kong government offers markets little resistance to infection.

CONTEXT NEWS

- China's National Health Commission said on Jan. 29 that the total number of deaths from a flu-like virus increased by 26 a day earlier to 132, almost all in Hubei province which is under virtual lockdown, while the number of confirmed cases rose by 1,459 to a total of 5,974.

- China on Jan. 28 stopped issuing travel permits for Chinese tourists going to Hong Kong and Macau to help prevent the spread of the new coronavirus, state television reported.

- Chief Executive Carrie Lam said on Jan. 28 that the high-speed rail service between Hong Kong and mainland China would be suspended from Jan. 30, and all cross-border ferry services would also be suspended.

(Editing by Jeffrey Goldfarb and Katrina Hamlin)

© Reuters News 2020