Amid the uncertainty surrounding Asian markets, mainly due to China’s coronavirus impacts, the analysts at the Australia and New Zealand Banking Group (ANZ) recently came out with their research. The report cited the past disease outbreak and market reaction, which were in contrast to the present ones, as a base case for the expectations.

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We look at the currency returns in the affected economies in three such past episodes: Severe Acute Respiratory Syndrome (SARS) in 2003, swine flu (H1N1) in 2009, and the Middle East Respiratory Syndrome (MERS) 2015.

The South Korean won fared during the three past outbreaks.

In some cases, like during the swine flu in 2009, the affected currencies also strengthened after the internet search interest for the disease peaked. However, this does not bear out as distinctly in other episodes.

This is likely due to other economic factors at play — for example, the Chinese stock market correction in mid-June 2015, which coincided with the MERS outbreak.

Even though currency markets started to react from 20 January, equity outflows only emerged from 27 January. Since then, a total of USD3.3bn has been pulled out by foreign investors from Asia ex-China bourses.

Asian currencies are likely to remain under pressure in the near term. Foreign equity outflows have been modest so far, but further selling is expected to pick-up the longer the outbreak lasts, especially if global growth concerns escalate.

We are holding off on making changes to our Asian currency forecasts at present. Needless to say, much will depend on when the outbreak can be contained. In the interim, technical analysis can help provide some short-term guide for key levels to watch out for.