Tourism-linked stocks sank in Hong Kong on Tuesday with investors spooked by confirmation that a deadly virus in China can be transmitted between humans, while confidence was also hit by Moody's decision to downgrade the city's credit rating.
The Hang Seng Index has enjoyed a healthy run-up over the past six weeks, thanks to the China-US trade pact, signs of an improving global outlook and looser central bank monetary policies.
But the optimism has given way to fears about an outbreak of a virus that resembles SARS, a disease that killed hundreds in China and Hong Kong and hammered the local equities market.
The new coronavirus strain, which has spread from the mainland city of Wuhan, has sickened more than 200 people. On Tuesday authorities said a fourth person had died from it.
A top scientist at China's National Health Commission said the strain has now been found to pass between humans, a major worry days before the Lunar New Year holiday, which sees hundreds of millions of people travel across the country.
"The timing is unfortunate as the great migration that is Chinese New Year starts in mainland China," said OANDA's Jeffrey Halley.
"The accompanying possibility is that infectious cases could rise. Asia will remember back to the origins of SARS outbreak and its adverse effects on economic activity in the region."
He added: "If things turn critical, it could provide a massive blow to the airline industry and a knockout punch to local tourism."
In a statement, the firm said: "The absence of tangible plans to address either the political or economic and social concerns of the Hong Kong population that have come to the fore in the past nine months may reflect weaker inherent institutional capacity than Moody's had previously assessed."