SARS takes financial toll

SINGAPORE: As Hong Kong shopping plazas go quiet and tourists shun Singapore and Vietnam, the financial toll from the deadly flu-like Severe Acute Respiratory Syndrome (SARS) in Asia is rising fast.  

Big losers are Asia’s airlines and travel companies, whose shares crumbled yesterday. But other industries are starting to suffer as the illness spreads – from taxi operators in Singapore to the shoemakers of China’s rising middle class. 

“There will be some earnings impact definitely around the region. Clearly airlines are getting hit because of less travel in the region. If this thing continues it will be negative for consumption stocks in China,” said Tan Choon Hoe, director of investments at AIB Govett (Asia) Ltd. “It’s a question of how soon this can be resolved,” he added. 

Guessing the full impact of SARS on markets is dangerous, analysts say, as the illness grows worldwide, killing nearly 60 people and infecting more than 1,600 since emerging in southern China in November. 

In Hong Kong, where more than 620 people have been infected and 13 have died, markets are bracing for more fallout after the benchmark Hang Seng Index hit a four-and-a-half year low yesterday, led by a 7% drop in the stock of the territory’s flag carrier, Cathay Pacific Airways.  

“First we saw aviation and hotels being hit, now the impact is gradually moving to retailers and will also hurt transport companies,” said Y.K. Chan, an investment strategist at VC CEF Brokerage.  

“There is also pressure on property developers because people do not want to visit show flats so they will put off buying,” he added. 

Analysts said food outlets and retail stores, too, were likely to feel the pinch as people avoided the city’s usually packed shops and dined at home. 

Dutch financial group ABN Amro was the latest investment house yesterday to cut its 2003 economic growth forecast for Hong Kong. pruning it by half a percentage point to 3.5%, assuming the virus could be brought under control within a month. 

In Taiwan, where 13 people have been infected, concern has spread beyond airline and shipping firms to China players that manufacture most of their goods on the mainland. 

“Taiwan’s economy is closely connected to China,” said Andrew Chen, vice-president of JF Asset Management in Taiwan. “SARS makes nearly all business operations a problem.” 

In Singapore, where 91 people have been infected with SARS and three have died, investors sold shares in airlines and hoteliers as expectations grew that the government’s official 2003 economic growth target of 2% -5% would be cut. 

A Straits Times survey found economists were slashing their estimates on Singapore's growth this year by as much as 1.8 percentage points due to the twin impacts of the SARS outbreak and the Iraq war. Singapore’s economy expanded 2.2% last year. – Reuters  

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