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Nikkei Markets

Hong Kong shares suffer weekly drop amid China coronavirus fears

Casinos and airlines retreat as outbreak is expected to hit sectors

HONG KONG (Nikkei Markets) -- Hong Kong shares edged higher on Friday but suffered their first weekly loss in eight weeks, as concerns over the spread of a deadly virus in and around China hurt investor sentiment.

The Hang Seng Index fell 3.8% during the week after adding 0.2% to 27,949.64 on Friday. The index had risen for seven consecutive weeks until last Friday amid indications that Sino-American trade relations were improving. China Mobile jumped 2.5% on Friday, contributing most to the index's gains by points, while Hengan International Group rose 1.5%. The two stocks were the only gainers on the Hang Seng Index during the week.

Hong Kong's financial markets closed at noon on Friday and will be shut on Monday and Tuesday for the Lunar New Year holiday. Mainland markets are closed on Friday and will reopen on Jan. 31.

The severe acute respiratory syndrome-like outbreak, which originated in the central Chinese city of Wuhan, has spread to other parts of China and has been detected in Hong Kong, Macao, Vietnam, Singapore, Thailand, Japan and the U.S. Authorities on Thursday halted travel from Wuhan as they attempt to contain the outbreak. Since then, a total of 10 cities in China's Hubei province have suspended some public transportation.

Beijing on Friday said the death toll from the virus that causes pneumonialike symptoms had risen to 25, and about 830 cases had been confirmed in all. The World Health Organization on Thursday said the virus is an emergency in China, but chose not to declare it a public health emergency of international concern yet.

"I'm inclined to believe that the market has digested the news," said Ivan Li, investment research department director at CSL Securities. He added, however, that there will be more uncertainty heading into the Lunar New Year holiday.

"The adjustment may be coming to an end, but I dare not say it is over."

Worries over the spread of the virus have been especially heightened as it coincides with the weeklong holiday, during which a few hundred million travel in and around the country.

Casino operators Galaxy Entertainment Group and Sands China fell 9.9% and 8.2%, respectively, during the week amid worries the viral outbreak would take a toll on gaming revenue, especially during the holiday week. Galaxy Entertainment rose 0.8% on Friday, while Sands China added 1.2%.

China Southern Airlines ended 0.2% higher on Friday, but fell 12.7% over the week. Air China declined 13.7% during the week even as it rose 0.2% Friday.

"If the current situation deteriorates, we expect the Chinese airlines to face some demand problems on Wuhan-bound routes," Ivan Su, equity analyst at Morningstar Investment Management Asia, wrote in a note, highlighting that China Southern was most exposed to the Wuhan civil aviation market.

Still, "barring a 'black swan' event, we expect airline operations to normalize over time," he added.

Huanxi Media Group surged 43.1% in Hong Kong. The media and entertainment company on Friday said its unit entered an agreement with Beijing Bytedance Network Technology to cooperate in several fields related to online videos. Bytedance will pay the unit at least 630 million yuan ($90.9 million). Bytedance owns the viral social media app TikTok.

Nissin Foods climbed 5.7% after the company said it was entering a joint venture agreement to import and sell Japanese branded food and beverage products in China. Nissin said it aims to commence business in Shanghai by the second quarter.

-- Benny Kung

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