Coronavirus Threatens To Shutter Hong Kong, May Delay Recovery In South Korea’s Export Machine

Carrie Lam wore a surgical mask when she announced travel restrictions with the mainland on Tuesday.

“Given the gravity of the epidemic, to further reduce the flow of people between the two places… the central government will stop issuing individual travel endorsements”, she said. Checkpoints will be established at the border. Flights and train services from the mainland are restricted.

The death toll from the novel coronavirus is now 106. Confirmed cases have risen above 4,500. US equity futures were already fading a bounce and sank further as the headlines from Lam’s presser crossed.

Hong Kong looks like it may effectively shut down, even as markets have yet to reopen after the holiday. Banks and other companies have instructed some employees to work from home.

The Kospi was crushed in a catch-up trade Tuesday, diving more than 3%, the most since October 2018.

Tourism-related names in South Korea have collapsed. One third of foreign travelers to South Korea are Chinese.

Note that although South Korea’s exports contracted for a 13th straight month in December, the data tipped a much shallower contraction than expected. Shipments to China, the country’s largest trading partner, actually rose. The first-20 days figures for January appeared to bode well and last week’s GDP beat was welcome news for the global trade bellwether which has been beset by trade concerns for more than a year.

The point: China’s fight to contain the Wuhan virus could potentially delay the recovery in South Korea’s export figures.

Samsung slumped on Tuesday, falling more than 3% in the worst session since May 9.

“It is extremely difficult to gauge the precise economic impact at the moment, as it very much depends on the duration and the scope of outbreak [but] currently, travel plans and spending during the Spring holiday look set to be severely curtailed, especially in Wuhan now that the government has adopted more drastic measures with a complete travel ban on residents”, SocGen’s Wei Yao cautions, of the impact on the Chinese economy. “If the situation has failed to stabilize by March, 1Q GDP growth will likely fall below 6%”.


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