Coronavirus panic has stripped almost 10% from the value of Australian stocks over the past week amid fears the outbreak could dent a global economy already struggling with persistently low growth.
Any potential hit to the Australian economy will further deepen damage done by bushfires and floods that have ravaged the east coast in recent months – although the extra day in February on Saturday may save the Morrison government the embarrassment of statistics showing a shrinking GDP.
Statistics released on Friday show government revenue has already taken a savage hit from the series of natural disasters, reducing the government’s chances of declaring a much-ballyhooed budget surplus in May.
The budget position was $3.7bn worse at the end of January than predicted in mid-year update numbers released the previous month, data released by finance minister Mathias Cormann revealed.
On the market, a heavy day of selling that tested brokers’ computer systems pushed the benchmark ASX200 index down 3.25%, or 9.8% for the week – taking it to the 10% mark that signifies a market “correction” and resets expectations of future growth.
The week of falls has wiped more than $200bn from the market and ravaged stocks that are exposed to China or the travel industry, including airlines, miners and educators.
But no sector has been exempt from the sell-off. Just 11 companies in the ASX200 index escaped a fall on Friday.
They included Bega Cheese, which is in a trading halt after telling the market its profit results for last year and the year before might be wrong due to an error in its accounting systems.
Retailer Harvey Norman, which had suffered only minor falls during the week, saw its share price collapse by 14% – the biggest decline of the day – as investors fled the stock following a disappointing half-year result.
The company, long a target for short-sellers, said “widespread bushfires and associated severe reductions in air quality that affected many communities” had hit franchisees during the peak Christmas shopping season, leading to a 4.1% fall in its profits for the six months to the end of December compared to the same time the previous year.
Friday’s 3.25% dive was the worst since a 3.8%, or 195-point drop on 29 September 2015.
“Today felt like panic selling,” said Pepperstone head of research Chris Weston.
“Whether this was a capitulation or there is more to it, this felt different” to the substantial declines earlier in the week, Weston said.
“The rug got pulled from the market today. The ferocity of the selling isn’t something we have seen for a long long time.”
Every sector was down at least 1% and most fell over 3%, with the tech sector the worst hit, down 4.71% as buy-now-pay-later operator and former sharemarket darling Afterpay plummeted 9.1% to a one-month low of $33.17.
The mining sector suffered the second-biggest losses, falling a collective 4.67% as mining giant BHP dropped 4.5% to a one-year low of $33.60, Rio Tinto fell 3.5% to a five-month low of $87.27 and Fortescue Metals declined 6.4% to a more than two-month low of $10.08.
Goldminers were not immune from the carnage, with Newcrest, Northern Star and Saracen all plunging between 8.0 and 9.8%.
While the government’s budget surplus is fast evaporating, accounting firm KPMG said the extra day on Saturday due to a leap year should be enough to avoid gross domestic product shrinking in the first three months of the year.
“The extra day’s GDP will add around $5.2bn to the economy for this year’s national accounts,” KPMG chief economist Brendan Rynne said. “That should be enough to ensure that the March quarter will not fall into negative territory.
“This technical outcome will not change the experiences of households and businesses in the current economic environment – the economy feels weak because it is weak.
“But if the March quarter number is negative it will confirm that we have a bigger problem to deal with than we thought – even if it is masked by a statistical anomaly in calculating the level of economic activity.”
Meanwhile, Labor seized on the monthly budget position figures to lambast the economic management of the prime minister, Scott Morrison, and treasurer, Josh Frydenberg.
Finance spokeswoman Katy Gallagher said it would be “humiliating” for the pair if the government failed to deliver a surplus.
“The fires and coronavirus on their own don’t excuse or explain their longstanding failures of economic management, which have been obvious for a long time,” she said.
“When growth is slowing, unemployment is rising, wages are stagnant and people are worried, now is the time for leadership and an economic plan and Morrison’s been incapable of providing either.”