Scary headlines about a new viral outbreak. People peering nervously over their surgical masks while on public transport. Colleagues and friends refusing to shake hands. Ask anyone who was in Hong Kong in early 2003, and they may recall these as some of their most vivid memories of that period.
The Chinese territory was suffering through an outbreak of what came to be called Severe Acute Respiratory Syndrome (SARS). And with another deadly virus now emerging from mainland China, many people in the Asia Pacific region are reliving those worrying times.
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So, it is little surprise that economists are also drawing parallels between the economic damage that SARS caused 17 years ago and what could happen now. And Hong Kong is once again near the epicentre of the outbreak while its economy is on the ropes.
“The outbreak of a SARS-like coronavirus in (the central Chinese city of) Wuhan is developing into a major potential economic risk to the Asia Pacific region now that there is medical evidence of human-to-human transmission,” Rajiv Biswas, Asia Pacific chief economist at research firm IHS Markit, told Al Jazeera.
But a closer look at the economic fallout of SARS reveals a potential silver lining to the current outbreak: The region bounced back fairly quickly from the 2003 outbreak.
Since reports of a cluster of viral pneumonia cases in Wuhan first emerged around the start of this year, more than 200 people have been infected and several people have died.
Lunar New Year
Those numbers may not seem all that dire, for now.
But Chinese authorities now say the virus can be spread by human contact. And with the busiest time of year for travel in many parts of Asia just days away when the Lunar New Year celebrations begin – when millions of people in China and elsewhere board trains, planes and buses to visit their families – the potential for it to spread rapidly is worrying health authorities.
And that has also spooked financial markets.
On Tuesday, Hong Kong’s main share index fell 2.8 percent, its biggest one-day drop since early August. Shanghai’s benchmark stock index lost 1.7 percent, with airline companies hit particularly hard. But shares of drugmakers soared as investors bet their sales will rise as demand for prescription drugs increases as the virus spreads.
“I’m no doctor, but I do think I understand human nature well enough to realise the potential for another economic hit to growth from this source,” said Robert Carnell, chief economist for the Asia Pacific at Dutch bank ING, in a research note.
At least one analyst says investors should expect share prices to fall even further.
“Markets have priced too little in, in terms of the spreading of this virus across multiple Asian cities from Wuhan and millions of travellers across China for [Chinese New Year] is likely to worsen the situation,” Margaret Yang, an analyst at CMC Markets in Singapore, said in an emailed note.
“Information asymmetry underscores the possibility that official figures of the number of patients might have been under-reported for social stability reasons,” Yang said.
The SARS outbreak started in China in early 2003, but spread rapidly as far as the US [December 30, 2003: GN/FA/Reuters]
Back in 2003, over a period of a few months, more than 8,000 people fell ill because of the SARS virus, mainly across Asia, with some cases reported as far away as Europe and the United States, killing more than 770 people in total, according to data compiled by the World Health Organization.
As people stopped going to restaurants and shops, and curtailed their travel plans, industries such as leisure, tourism and transport across Asia suffered.
The Asian Development Bank estimates that the region’s worst-affected economies – mainland China, Hong Kong, Singapore and Taiwan – experienced economic losses totalling $13bn, shaving between half and a whole percentage point off the region’s gross domestic product.
But the region bounced back pretty swiftly.
“These losses, however, did not affect any of these economies for more than a couple of quarters, and even the most heavily affected countries started recovering by [the third quarter of] 2003,” the bank says in a report published in October on the economic impact of SARS.
Hong Kong’s open, service-oriented economy, however, suffered more than most places in Asia.
Its gross domestic product – the main measure of size of an economy – shrank by 0.5 percent in the second quarter, before recovering over the next two quarters and growing by 3.1 percent for 2003 as a whole.
More pain, no gain?
But there are some big differences between the state of Hong Kong’s economy then, and now.
In 2003, its main trading partner – mainland China – was growing at an annual pace of about 10 percent. In fact, part of Hong Kong’s economic policy response to the SARS epidemic was to open itself up further to mainland China to take advantage of growth across the border. One example: It started allowing individual mainland Chinese tourists to visit the territory, rather than confining them to tour groups.
But today, the mainland’s annual growth rate is about six percent, its slowest pace in nearly 30 years. China’s trade war with the US has affected not only the mainland, but Hong Kong as well, with its heavy reliance on its role as an important transshipment hub between mainland China and the rest of the world.
Medical staff in Wuhan, Hubei province, China, where the latest viral outbreak started [January 20: EPA]
And Hong Kong was already in a recession before the latest viral outbreak, its economy pummelled by months of violent anti-government protests triggered by anger at a now-withdrawn bill that would have allowed for suspects to be extradited to the mainland.
SARS and the latest viral outbreak seem to share a common trait: They appear to affect people who have already been weakened by either old age or other conditions.
With that in mind, the prognosis for Hong Kong’s ailing economy for the months ahead – as it suffers under the perfect storm of a plunge in tourist arrivals due to protests and now a viral outbreak, combined with the effects of the US-China trade war – could spell yet more pain.
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
