A new coronavirus outbreak (aka “2019-nCoV”) that started last month in Central China is already an epidemic and could reach pandemic proportions before it is contained. The first suspected cases were reported on December 31, 2019. By Wednesday January 22, there were 569 confirmed cases in mainland China, four in Thailand, two in Hong Kong, two in Macau, and one each in Japan, South Korea, Taiwan and the United States. As of January 22, there have been 17 fatalities, up from six the day before.
Transmissions are occurring at an alarming rate. In the Chinese province of Hubei, of which Wuhan is the capital, the number of announced cases jumped from 270 on Tuesday to 444 on Wednesday.
Coronaviruses mainly circulate among animals but have been known to evolve and infect humans. While the source of this latest virus is not yet known, Chinese authorities have said they believe it was transmitted to people from some type of wild game animal at the Wuhan seafood and livestock market. 2019-nCoV is said to be from the same family as the viruses that caused Severe Acute Respiratory Syndrome (“SARS”) which originated from civet cats and broke out in 2002, and Middle Eastern Respiratory Syndrome (“MERS”) which broke out a decade later and originated from camels.
People across Asia are already stockpiling protective gear, and for good reason. Wuhan is the seventh-largest city in China, with a population of more than 11 million people. It is a major transportation hub connecting central China to metropolises like Beijing in the North, Shanghai further East, and Hong Kong to the South.
Direct flights from Wuhan also connect with Europe (for example, there are six flights weekly to Paris, three weekly to London, and five weekly to Rome) and the United States, as well as cities closer to home like Seoul, Bangkok, Kuala Lumpur and Singapore. So, this virus could easily and rapidly spread to other parts of the world.
With China entering one of its busiest travel periods of the year, leading up to the Lunar New Year holiday that formally begins on Friday, the number of cases could skyrocket over coming weeks. The Lunar New Year holiday is huge not only in China and nations with large populations of ethnic Chinese, but also in countries such as the Koreas and Vietnam. It’s a time when people go on holiday and meet up with family.
SARS, which spread through China in late 2002 and early 2003, also overlapped with the Chinese New Year holiday. By the time that outbreak was finally contained, it had infected about 8,000 people and killed 774 people in 37 countries, including more than 600 victims in mainland China and Hong Kong.
Complicating matters further is the WHO’s suggestion that the virus may be transmitting in an ongoing, sustained manner between people. As reported by STAT, the WHO defines “sustained human-to-human transmission” as transmitting easily from one person to the next and then further onward — in the way that flu or other established human viruses work. That’s in contrast to “limited human-to-human transmission”, in which a virus dies out after infecting a person or a few people who are in close contact with each other.
The fact that 2019-nCoV is capable of spreading through sustained transmission will ratchet up already high concerns internationally, since that would make the epidemic significantly more difficult to stop. Even MERS, which was relegated to “limited human-to-human transmission” status, not "sustained transmission", managed to spread to over 27 countries and caused 750 deaths before it was controlled.
When the coronavirus that eventually resulted in SARS started to spread in late 2002, China initially denied there was a problem for several months. This time around, the country’s leaders are taking no chances. China has already shared the genetic code of the virus and has promised to take all measures necessary to prevent its further spread. The city of Wuhan, for instance, plans to halt all outbound flights and trains in a transportation lockdown that begins at 10 AM local time on Thursday. Service on subways, city buses, long-distance coaches and ferries will also be suspended for an indefinite period.
Countries around the Asia-Pacific and beyond are also stepping up their defenses against the virus. Measures, including thermal screening, have been introduced at airports in an attempt to limit the spread of the virus. In places like the UK, inbound planes are being met by doctors checking for cases of flu-like illness.
Still little is known about the new virus which can cause pneumonia and whose symptoms include fever, coughing and difficulty breathing. Chinese authorities have yet to announce what they believe is the incubation period for the disease, or the time it takes for infected patients to start showing symptoms. It could be a while, therefore, before the transmissions stop spreading.
The impact is being felt in China’s financial markets. Chinese stocks are down year-to-date (YTD), battered by concerns that the virus will spread and disrupt economic activity. Yields on China’s 10-year government bonds have dipped below 3% for the first time since August. Shares of domestic airlines, tour and hotel companies are vulnerable, as many Chinese are canceling trips. People are also avoiding public places such as cinemas and shopping centers, which could deliver a hit to retail sales in Q1.
One segment of the market that’s thriving, however, is healthcare. The KraneShares MSCI All China Health Care Index ETF (KURE) has gained 6.3% YTD while the iShares MSCI China ETF (MCHI) has lost 1.3%. KURE has also outperformed the US Healthcare ETF (IYH) and the SPDR S&P 500 ETF (SPY), which posted respective returns of +2.5% and 2.0% over the same period.