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Outbreak of deadly coronavirus raises fears of SARS repeat

Financial markets around the world reacted with fear, with travel companies and those with exposure to Asia falling most

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The deaths of several people from coronavirus in China has raised fears of a repeat of the devastating effects of the SARS virus seventeen years ago.

On Tuesday morning there were four deaths confirmed in Wuhan City in Hubei Province, with state broadcasters reporting by the afternoon that this had risen to six in the region.

What is coronavirus?

Varieties of coronavirus, which is so named because of the crown-like spikes that can been seen with an electron microscope, can causes symptoms ranging from cold-like symptoms, to fever and severe breathing difficulties.

These viruses are common in species of animal including camels and bats, but can very occasionally evolve and infect humans and spread, according to the US Centre for Disease Control (CDC), which said it was “closely monitoring” the outbreak in China.

Initial reactions were muted until Chinese authorities announced overnight that human-to-human transmission had taken place between a patient and a health worker, with the number of infected people sharply on the rise.

Authorities in China and the CDC say the outbreak has been caused by a novel coronavirus, with the origins of the outbreak linked to a large seafood and animal market, “suggesting a possible zoonotic origin to the outbreak”. 

So far, more than 200 cases had been confirmed in hospitals around Wuhan, with suspected cases also reported in Beijing and Guangdong province, another confirmed in Japan, two in Thailand, and one in South Korea.

Lessons from the SARS epidemic

Coronavirus was the cause of the viral respiratory illness known as severe acute respiratory syndrome (SARS) in 2003, or more fully SARS-associated coronavirus (SARS-CoV). 

The first human case was reported in Guangdong Province in November 2002, before SARS became an epidemic in 2003.

The syndrome’s spread around the world was quickened by a handful of highly contagious ‘super spreaders’, such as former flight attendant Esther Mok, who was believed to have carried the disease from Hong Kong's Metropole hotel to Singapore, where the hospital there unknowingly allowed her to infect members of her family, church and dozens of other people. 

American-Chinese businessman Johnny Chen, who also stayed at the Metropole, fell ill on a flight that was diverted to Vietnam, where communicable diseases expert Dr. Carlo Urbani was the first World Health Organisation officer to identify the outbreak of this new disease, before later dying from SARS.

The global outbreak of SARS saw it spread across 37 countries in Asia, North and South America and Europe before being contained later that year. 

Some 8,098 people worldwide became sick with SARS during the 2003 outbreak, the WHO has calculated, of which 774 died. This compares to seasonal flu, which is estimated to result in 3-5mln annual cases of severe illness and result in between 290,000 and 650,000 deaths each year.

The Asian Development Bank estimated that the economic impact of SARS was around $18bn in East Asia alone, around 0.6% of gross domestic product.

Spread of 2020 coronavirus

“More cases should be expected in other parts of China and possibly other countries in the coming days,” WHO spokesman Tarik Jasarevic said on Tuesday.

US and Australian authorities said they would begin to screen travellers who had come from Wuhan, with Australia also having already quarantined one man returning from the city who is believed to carry the disease.

Investors fearing the effects of the virus on the economy were removing their money from local tourism stocks.

Shares in Fosun International, owner of Club Med and Thomas Cook’s brand name, were down 4%; while Hong Kong’s Hang Seng index fell 2.8%.

As reports filtered in about the virus being spread between humans, analysts at Rabobank said this “is weighing on sentiment as concern over a repeat of SARS builds” especially as it comes at a time when tens of millions of Chinese citizens travel across the country for the annual Lunar New Year holiday at the end of the week. 

In 2003, the SARS outbreak forced the government to cancel the May Day holiday.

“The fact that all sub-sectors within the Shanghai Comp are notably weaker save for healthcare (which has just closed up 1.94%) corroborates the view that the market is indeed taking its cue from this development.”

What next?

Analysts at Saxo Bank added: “While we don’t know the direction in equities from here related to the coronavirus, history tells us that there are many unknowns and that the initial reaction often fails to discount the true extent. 

“Short-term this could get much worse for Asian equities as the Chinese New Year means that millions of people will be travelling potentially spreading the virus fast over large areas.”

Another SARS-like outbreak would lead to “a sharp contraction in many leading indicators of the global economy”, said Neil Wilson at Markets.com.

“We don’t know how bad this will be, but with authorities confirming the disease can spread between humans, it’s wise to be on guard for this outbreak to get worse before it gets better. 

“And there is a real fear that as millions of people travel long distances for the holidays the disease could spread far and wide. Markets are worried about this spreading to more cities.”

In London, British Airways owner IAG (LON:IAG) was down by a similar amount, in line with many global intercontinental airlines, while a 3% fall for Burberry Group (LON:BRBY) showed the reaction of investors fearing a hit to sales of luxury goods in a Chinese market that accounts for around a third of the global total.

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