Asia-Pacific stocks fall on fears of Omicron variant’s spread

Asia-Pacific stocks began the trading week lower, extending a decline triggered on Friday by the Omicron coronavirus variant, but markets showed signs of recovery by mid-morning on reports that the virus strain presented only mild symptoms.

Australia and Japan recorded the region’s biggest declines on Monday, where shares fell sharply in early trading before recovering some losses.

Australia’s benchmark S&P/ASX 200 shed as much as 1.4 per cent in the first 15 minutes of trading before regaining ground to be down 0.6 per cent by mid-morning.

Japan’s Topix fell 1.5 per cent on opening but pared losses to about 1.1 per cent, while South Korea’s Kospi lost 1 per cent and Hong Kong’s Hang Seng index edged 0.7 per cent lower.

On Friday, global stocks suffered the biggest sell-off in more than a year as countries around the world announced travel bans and containment measures to combat the spread of the new variant.

Scientists believe Omicron may be more transmissible than the highly infectious Delta variant and carries mutations that could make it resistant to vaccines.

But Barry Schoub, the chair of South Africa’s ministerial advisory committee on vaccines and the doctor who discovered the Omicron variant, told Sky News on Sunday that most patients infected with the strain were only exhibiting “mild cases”.

The World Health Organization also cautioned on Sunday that it was “not yet clear” whether the severity or transmissibility of Omicron differed from previous strains.

Oil showed signs of recovering from Friday’s retreat, with prices of West Texas Intermediate rising above $70 a barrel.

In South Africa, where the variant was identified, the rand gained more than 1 per cent against the dollar to R16.08 after declining sharply on Friday.

But the pain continued for airline stocks, with Australia’s Qantas dropping as much as 6.2 per cent in early trading before recovering. Malaysia’s low-cost carrier AirAsia fell as much as 6.7 per cent, while Hong Kong’s Cathay Pacific lost almost 5 per cent, according to data from Refinitiv.

Sebastien Galy, senior macroeconomic strategist at Nordea Asset Management in Luxembourg, said the Omicron variant would make investors more risk-averse, with companies in the travel and leisure industries to be hit the hardest. He added that potential outbreaks in China could also hit global supply chains.

“[But] the impact is broader than this on the psychology of a market bulled up on risk and consumers that had thought the health crisis was steadily drifting behind them,” said Galy.

The yield on the US benchmark 10-year Treasury note, which moves inversely to its price, gained five basis points to about 1.54 per cent after sustaining its biggest drop since March 2020 on Friday.

Listed Macau casino operators also fell on Monday, following the arrest of Suncity chief executive Alvin Chau over the weekend. Shares in Wynn Macau fell as much as 14 per cent, while shares in Galaxy Entertainment dropped as much as 8.8 per cent. Suncity suspended trading in its shares on Monday morning in Hong Kong.

Meituan also took a hit after the Chinese ecommerce group reported a loss in its third-quarter results on Friday, with its Hong Kong-listed shares falling as much as 8.8 per cent on Monday.

Shares in Evergrande, the world’s most indebted property developer, dropped as much as 9.2 per cent on Monday following reports last week that the group’s chair, Hui Ka Yan, had sold shares.

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