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ASX travel stocks hit by growing China virus scare

The market may be trading lower today but it’s travel-related stocks that copping a beating on fresh reports that the Wuhan virus is spreading quickly as it can be transmitted between humans.

The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price tumbled 3.1% to $8.71, while the Webjet Limited (ASX: WEB) share price plummeted 2.9% to $13.88 during lunch time trade.

Other stocks to come under pressure include the Flight Centre Travel Group Ltd (ASX: FLT) share price, which shed 2.2% to $42.10, and the Qantas Airways Limited (ASX: QAN) share price, which fell 1.4% to $6.95.

In contrast, the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index shed 0.5% at the time of writing.

Are we facing the next SARS?

Investors should be alert as the outbreak of this new coronavirus (a virus passed on to humans from animals) could become the next Severe Acute Respiratory Syndrome (SARS) epidemic.

Sydney Airport is starting to screen passengers on flights from the Chinese city of Wuhan, which is believed to be ground-zero for the illness.

Further, Bloomberg reported that several medical workers in China have been infected with the new virus, called 2019-nCoV, and that the number of fatalities have increased to four.

Spreading between humans

This new development shows that 2019-nCoV is easily passed on from human to human. The outbreak comes as hundreds of millions of Chinese travel back to their hometowns to celebrate Chinese New Year on January 25.

The virus is similar to the SARS virus 17 years ago, which claimed around 800 lives around the world. It’s hoped that governments around the world are better prepared this time round to contain the any outbreak.

But even if they are successful, the pathogen will likely extract a heavy price on travel-related stocks here and aboard. Many will be too afraid to venture out and are likely to cancel their travel plans.

Hits stocks harder than health

There are separate reports that the virus reached other Asian countries like Japan. If it spreads further, other non-travel stocks could also come under pressure from the fallout.

The potential pandemic may not prove to be as deadly as SARS but it doesn’t need to be to extract a heavy price from share investors if it slows the already fragile economic growth.

The International Monetary Fund (IMF) just downgraded its global growth forecasts to just 2.9% for 2019 and warned that there is no clear turning point for the world economy.

Growth should pick up this year though to 3.3%, but that’s below the IMF’s earlier estimate of 3.4%.

Let’s hope 2019-nCoV doesn’t trigger another downgrade for 2020.

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Motley Fool contributor Brendon Lau owns shares of Webjet Ltd. Connect with him on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited and Sydney Airport Holdings Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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