ANZ warns Wuhan virus a 'potentially devastating' addition to economic risks

Tuesday, 28 January 2020

Global sharemarkets are continuing to weaken in the face of fears over the Wuhan coronavirus.

ANZ has described the Wuhan coronavirus as a new and 'potentially devastating' global risk in an update on New Zealand's economic prospects.

Academic studies have suggested the Sars coronavirus outbreak in 2003 knocked only 0.08 per cent off New Zealand's GDP that year.

ANZ said the impact of Sars turned out to be not as bad as feared.

'But this is quite a different virus – on early evidence, not nearly as lethal, but much more easily spread – and the New Zealand economy's exposure to China is much greater now,' ANZ's report said.

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United States stocks experienced their biggest one-day fall in three months when trading closed on Tuesday morning, New Zealand time, with the Dow Jones industrial average down almost 1.6 per cent and shares on the technology-rich Nasdaq index down 1.9 per cent.

The NZX50 was down 1 per cent during lunchtime trading with travel-related businesses among the hardest hit.

Tourism Holdings shares were trading 5 per cent lower and down 15 per cent over a week.

Corporate travel technology company Serko was also down more than 10 per cent on the record high it reached last week.

ANZ said global risks were already 'titled to the downside' prior to concerns about the impact of the new virus which had particular downside risks for China's economy.

The economic impacts could be significant, but were 'highly uncertain at this stage', the bank said.

'The hope is that the outbreak can be contained rapidly, but retail, tourism and related sectors in China will already be experiencing an impact.

'Should the outbreak last some time, there could be an impact on industrial production and global growth, though fiscal and monetary stimulus could provide an offset.'

Analyst Morningstar reported that travel-related stocks including airlines, casinos and hotels were among the hardest hit stocks on Wall Street while noting comments some investors that they viewed any long-term economic impact as unlikely and the reaction overblown.