China, HK stocks drop sharply as virus fears deepen amid Wuhan lockdown

SHANGHAI, January 23 (Reuters) - China and Hong Kong stocks dropped sharply on Thursday, with investors dumping shares of restaurants, cinemas, casinos, airlines and theme parks, as China locked down the city at the epicentre of the outbreak to contain the spread of the coronavirus. ** The CSI300 index fell 1.8% to 4,058.31 at the end of the morning session, while the Shanghai Composite Index lost 1.5%, to 3,016.18. The Chinese market will be closed for a week starting Friday due to the Lunar New Year. ** In Hong Kong, the Hang Seng index dropped 1.7% to 27,872.79, having touched the lowest level in a month. The Hong Kong China Enterprises Index lost 2.1% to 10,942.80.

** Wuhan’s local government on Thursday shut down all urban transport networks and suspended outgoing flights from the city, of 11 million people, the epicentre of a new flue-like virus outbreak that has so far killed 17, and infected nearly 600 people.

** Larry Hu, economist at Macquarie Capital Ltd, said the market now is dominated by fears of the Wuhan virus, which stirs dark memories of the 2002-2003 SARS outbreak. Complicating efforts to contain the virus, millions of Chinese will travel for the Lunar New Year, which Hu described as “the largest people movement on the planet.”

** “The bad news is that the worst is yet to come,” Hu wrote, adding: “We can’t answer how severe it will be and when it will end.”

** However, Hu argued that fundamentals will rule for the year. “The negative impact on China’s economy is manageable and short-lived.”

** Investors continued to dump tourism-related shares on Thursday.

** Airline shares continued to sag in both China and Hong Kong. Major carriers including Air China , China Eastern Airlines and China Southern Airlines drop by more than 2%.

** Chinese film producers and cinema operations sagged. Wanda Film slumped nearly 4%, while China Film and Beijing Enlight Media Co fell more than 2%.

** Hong Kong-listed Chinese restaurant operators including Tasty Concepts, Jiumaojiu, Haidilao and Xiabuxiabu tumbled. So did casino operators such as MGM China and Sands China.

** Biotech firms and drugmakers were the only bright spot. Shandong Lukang Pharmaceutical Co, Jiangsu Sihuan Bioengineering Co and Jiangsu Lianhua Pharmaceutical Co all jumped over 8%. (Reporting by Samuel Shen and Brenda Goh; Editing by Shailesh Kuber)