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Escalating Coronavirus Outbreak Pressures Asian Indexes; Hong Kong Tumbles on Moody’s Downgrade

James Hyerczyk

The major Asia Pacific stock indexes finished sharply lower on Tuesday as investors were rattled by an escalating coronavirus outbreak in China. The outbreak of a new coronavirus has spread to more Chinese cities, including Shanghai and the capital Beijing, authorities said on Monday.

“Concerns over the spread of the virus is affecting market sentiments. Unfortunately, it’s coming at a bad time because it’s travel season in China ahead of the New Year celebrations,” said Linus Loo, head of research at Lim & Tan Securities.

On Tuesday, Japan’s Nikkei 225 Index settled at 23864.56, down 218.95 or -0.91%. Hong Kong’s Hang Seng Index finished at 27985.33, down 810.58 or -2.81% and South Korea’s KOSPI Index closed at 2239.69, down 22.95 or -1.01%.

China’s Shanghai Index settled at 3052.14, down 43.65 or -1.41% and Australia’s S&P/ASX 200 Index finished at 7066.30, down 13.20 or -0.19%.

Shanghai Index Hits Two-Week Low

Losses in the banking and industrial sectors weighed on the city-state’s benchmark as it fell to its lowest in nearly two weeks. Lender DBS Group Holdings lost nearly 1%, while conglomerate Jardine Strategic Holdings was down over 2%.

Moody Cuts Hong Kong’s Rating

Stocks in Hong Kong led losses regionally among major Asian markets on Tuesday after ratings agency Moody’s cut its rating for the city to Aa3 from Aa2 on Monday. In making the move, Moody’s said its view on the strength in the Chinese-ruled city’s institutions and governance is “lower than previously estimated.”

In a statement on Tuesday, Hong Kong’s government said it strongly disagreed with Moody’s assessment and was “deeply disappointed” by the decision.

The agency, however, moved its outlook to stable from negative, saying this reflects Hong Kong’s superior fiscal strength and consistent macroeconomic stability.

“The absence of tangible plans to address either the political or economic and social concerns of the Hong Kong population that have come to the fore in the past nine months may reflect weaker inherent institutional capacity than Moody’s had previously assessed,” the agency said in a statement.

BOJ Holds Short-Term Rates Steady

The Bank of Japan (BoJ) kept its short-term policy rate unchanged at -0.1% while keeping its 10-year Japanese government bonds yield target around 0%, largely in line with expectations.

In its outlook for economic activity and prices, BoJ policymakers said the country’s economy is “likely to continue on an expanding trend” through fiscal 2021.

Aussie Shares Snap 5-Day Winning Streak

The Australian Share market ended its five-day record-breaking winning streak with a modest pullback.

With US markets shut on Monday for Martin Luther King Day, Chinese markets closed on Friday for Chinese New Year and the ASX shut next Monday for Australia Day, there was not a lot of liquidity in the market and traders were taking some risk off the table.

Small-cap stocks were particularly hit hard, with the Small Ordinaries Index of Australia’s 200 to 300 biggest companies down 0.6 percent, while ASX’s 20 biggest companies collectively gained 0.05 percent.

This article was originally posted on FX Empire