Economic fallout in Asia from the SARS crisis mounted today as the World Bank cut its regional forecast, Hong Kong received a credit rating blow and investors dumped shares of Asian retailers and exporters to China.
Although investors have already cut exposure to sectors most exposed to the Severe Acute Respiratory Syndrome (SARS) virus - such as retailing and regional travel - selling picked up after an acceleration in cases in China and growing fears SARS may stall the region's economic engine.
A report that top Japanese carmaker Toyota Motors plans to withdraw most of its Japanese staff and their families from Beijing due to the virus deepened the gloom.
"Now SARS seems a little bit more protracted and it's affecting China. People are revising down China's GDP numbers and that's an important growth engine for us," said Roy Phua, fund manager at DBS Asset Management, which manages S$5.6 billion.
Hong Kong shares slid 1 per cent to their lowest levels in four-and-a-half years. Taiwan stocks fell 4 per cent and Singapore shares fell 2 per cent, led down by Singapore Airlines.
Asian government attempts to shore up confidence seem to be doing little to turn the tide of anxiety over the outbreak of the deadly virus, which has killed at least 251 people.
Hong Kong unveiled a $1.5 billion SARS relief package on Wednesday, following Singapore's $129 million of help for its troubled tourism and transport sectors. Malaysia has said it may ask banks and utilities to cut costs for corporate customers.
Citigroup and J.P Morgan Chase expect China's economy to contract in the second quarter due to the impact of SARS, putting an end to a run that has seen the economy average more than 7 per cent growth in recent years.
With hundreds of flights cancelled and airports empty, Cathay Pacific Airways and its parent, Swire Pacific, said they may cut proposed dividend payouts to preserve much-needed cash for the struggling airline.
The World Bank cut 0.5 percentage points from its East Asian growth forecast, in part due to the SARS blow to tourism and other face-to-face sectors such as business travel, transportation and retail. It now sees 5 per cent growth this year.
Although China is the epicenter of the SARS outbreak, its robust economy and domestic demand should act as a partial buffer for export-driven Asian nations, the World Bank said.