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Nikkei Markets

Hong Kong stocks set new three-year low as virus fears mount

Li & Fung soars on privatization plan, while Evergrande sinks on profit warning

HONG KONG (Nikkei Markets) -- Hong Kong stocks tumbled on Monday as concerns over rising cases of new coronavirus infections across large parts of the world continued to alarm investors, prompting them to move further away from asset classes seen as risky.

The Hang Seng Index slumped 4.9% to 21,696.13, giving up all the gains it recorded on Friday and then some to reach its lowest level since December 2016. London-headquartered lender HSBC Holdings tumbled 6%, and power-tools maker Techtronic Industries plunged 13%. Property developer CK Asset Holdings sank 9.4%.

Losses deepened in afternoon trading after Hong Kong Chief Executive Carrie Lam announced non-residents will be denied entry into the city for 14 days starting Wednesday, barring visitors arriving directly from Macau and Taiwan, who will be allowed in but subjected to a 14-day quarantine. All transit passengers will be denied entry. Lam also said the government will amend a law to ban the sale of alcoholic beverages at restaurants.

Regional markets were awash in red ink, as were U.S. equity index futures, pointing to likely steep losses on Wall Street later in the day. Millions of people across major world cities have been asked by authorities to stay indoors to contain the pandemic, which has so far infected more than 330,000 people and killed nearly 15,000, intensifying worries that the outbreak would drag the global economy into a recession.

S&P Global Ratings said in updated estimates that the total and permanent income loss for Asia-Pacific from the virus, which causes the COVID-19 disease, is approximately $620 billion.

Michael Strobaek, global chief investor officer at Credit Suisse, wrote in a note that with markets still fragile, it was "too early to re-enter risk assets in any significant manner because the sell-off" was likely not over given the evolution of the pandemic.

Stanley Chik, head of research at Bright Smart Securities, advised investors to not be aggressive, "given that surges and plunges have become norms."

"The outbreak in Europe and the U.S. isn't in control yet, plus major cities such as London and New York are locking down. That could hit the economy hard," he said. "The financial market this week will inevitably continue to see volatility."

In the wider region, the Shanghai Composite Index gave up 3.1%, while the Nikkei Asia300 Index of regional companies outside Japan skidded 5.9% by late afternoon.

Supply-chain manager Li & Fung soared 88% to HK$0.94 after saying late on Friday that it had received a privatization proposal from a company backed by its founders at a price of HK$1.25.

Anhui Conch Cement ended 2.1% lower in the weak broader market, reversing gains it posted earlier in the day after it reported 2019 results, recording a 12.6% increase in its net profit.

Major property developer China Evergrande Group plunged 16.9% after issuing a profit warning, saying it expects to report a 48% decrease in 2019 net profit. Its subsidiary Evergrande Health Industry Group plummeted 15.6% after warning of a wider net loss for last year.

China Merchants Bank slumped 6.8% amid broad market weakness despite reporting a more than 15% increase in last year's net profit.

-- Benny Kung

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