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Nikkei Markets

Hong Kong shares skid as coronavirus fears loom large

Mainland airlines slide after reporting sharp declines in February traffic

HONG KONG (Nikkei Markets) -- Hong Kong shares slumped on Thursday, following another sell-off on Wall Street overnight, as worries over the fallout from the fast-spreading coronavirus continued to slam sentiment.

The Hang Seng Index slid 4.3% to 21,344.93 by noon, heading for its lowest close since July 2016. Heavyweight insurers AIA Group and Ping An Insurance Group fell 5.4% and 5.9%, respectively, contributing to about a fifth of the index's losses by points. China Mobile declined 6.1% ahead of its 2019 earnings, due later on Thursday.

Power Assets slumped 6.7% after reporting a 6.6% decline in 2019 profit and a 13.3% decrease in revenue.

Futures were pointing to another weak opening on Wall Street following steep losses overnight as the new coronavirus, which originated in the central Chinese city of Wuhan, spreads rapidly across the world, fueling worries that it will push a number of economies into recession.

Total confirmed cases of the virus were roughly 208,000 as of Wednesday, with less than half of those in China now. Italy had more than 35,000 cases and nearly 3,000 fatalities as of Wednesday, as the country's hospitals scramble to cope with the number of patients. Instances of the infection in Iran, Spain and France were also on the rise.

The European Central Bank on Wednesday pledged to buy 750 billion euros ($820 billion) in bonds through 2020. The ECB's move follows rate cuts and other supportive measures announced by a number of central banks, including the U.S. Federal Reserve's two unscheduled rate cuts this month.

Market participants expect more pain for equities.

"Investors need to wait -- it is very difficult to make a call on the trough. There's huge uncertainty," said Kenny Wen, wealth-management strategist at Everbright Sun Hung Kai. "The plunge we are seeing these days could be the steepest in 20 or 30 years -- it is the most difficult scenario to predict. That weakens the effect of technical analysis, and weakens our judgment over the short term," he said.

"I'm not worrying about the ups and downs in the stock market. I'm paying attention to the bond market," Wen added. "People would also need to think about systemic financial risk. The chance is small, but people need to think."

In the mainland, the Shanghai Composite Index slid 2.1%, while the yuan traded onshore dropped 0.4% against the dollar to 7.0703.

Chinese airlines tumbled in Hong Kong after reporting steep declines in February operating numbers as the coronavirus outbreak hits air travel.

China Southern Airlines slumped 12.1% following an 85.1% drop in February passenger traffic, while Air China skidded 8.9% after it reported an 82.9% decline in passenger traffic last month.

China Eastern Airlines was down 8.4% following an 87.5% tumble in passengers carried during February.

CK Infrastructure Holdings slid 11%. The company on Wednesday reported 2019 net profit of 10.51 billion Hong Kong dollars ($1.35 billion), little changed from a year ago, but said turnover for the year fell 4.7%.

Luk Fook Holdings tumbled 13% after reporting a 49.9% slump in retail business same-store sales for January and February. The jewelry company also said it expects to report a substantial decline in revenue and profit for the year ending March 31.

Prada jumped 8.8% following a 24.5% increase in 2019 net income and a 2.7% increase in revenue.

-- Benny Kung

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