HONG KONG (MarketWatch) — Hong Kong stocks on Friday suffered their worst drop in more than eight months as worries about the impact from a new strain of avian flu in China hurt sentiment, slamming airline shares in particular.
South Korean and Australian equities retreated as investors digested an increase in U.S. jobless claims and awaited key employment data later Friday. But Japanese shares were a major exception, with several sectors extending their rally on expectations for unprecedented monetary stimulus.
Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -1.09% slid 2.7%, its worst percentage decline since late July, following reports of deaths linked to a new strain of avian flu. Airline stocks in Europe were also hit by the news. Read Europe Markets.
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Damian Brewer, an analyst at RBC Capital Markets in London, said the combination of fears related to bird flu, and geopolitical worries linked to North Korea, wasn’t helpful to airlines.
Andrew Sullivan, director for sales trading at Kim Eng Securities, wrote to clients that the threat, although “probably overblown,” was a big unknown factor for investors.
Cathay Pacific Airways Ltd. /zigman2/quotes/203532437/delayed HK:293 -0.19% /zigman2/quotes/208114856/delayed CPCAY +0.56% dropped 4.1% amid concerns about the impact of bird-flu deaths in China on air travel.
Among mainland Chinese carriers, Air China Ltd. /zigman2/quotes/203408003/delayed HK:753 -1.86% /zigman2/quotes/207207351/delayed AIRYY -1.05% slumped 9.8%, China Eastern Airlines Corp. /zigman2/quotes/203578936/delayed HK:670 -4.19% /zigman2/quotes/205483076/composite CEA -3.89% lost 8.3% and China Southern Airlines Co. /zigman2/quotes/208800010/delayed HK:1055 -2.99% /zigman2/quotes/206691352/composite ZNH -1.58% lost 8.5%. Read blog on the latest death linked to the bird flu virus.
RBC’s Brewer said the impact from the outbreak would depend on how well it is contained. “Obviously, if it became widespread and disrupted travel, it won’t be helpful. That said, previous scares have proved just to be scares, and no more.”
Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.39% climbed sharply higher for a third straight day, ending the day 1.6% higher for a weekly gain of 3.5%.
By contrast, South Korean stocks suffered a weekly loss of 3.9%, while the benchmarks in Hong Kong and Australia lost 2.6% and 1.5%, respectively.
The Nikkei Average’s advance Friday came on top of the 2.2% rally Thursday, when the Bank of Japan’s decision to unveil bold policy easing sparked a sharp swing higher for stocks in Tokyo, also spurring shares on Wall Street later in the day, despite the downbeat jobless-claims figures.
“It was the Bank of Japan’s aggressive stimulus measures that provided the real impetus for U.S. markets. ... Given that the U.S. jobless claims data underwhelmed, there is concern the nonfarm payrolls will follow suit and add to the recent run of bearish signals. If this does occur, another sell-off is on the cards, deepening the current correction taking place,” said CMC Markets sales trader William Leys.
Japanese property shares were among the top performers after the central bank said it would buy more real-estate investment trust securities.
Mitsui Fudosan Co. /zigman2/quotes/205394574/delayed JP:8801 -0.65% /zigman2/quotes/208297288/delayed MTSFF +8.74% jumped 13%, Mitsubishi Estate Co. /zigman2/quotes/208910776/delayed JP:8802 +1.40% /zigman2/quotes/208166463/delayed MITEF -0.08% spiked 10.5% and Sumitomo Realty & Development Co. /zigman2/quotes/206628792/delayed JP:8830 -3.46% /zigman2/quotes/205763034/delayed SURDF +2.27% added 12.6%.