“During the holidays, there was talk in financial circles that Asia’s sizzling stock markets could be overheating and might be due for a midyear correction in 2004. Now there is a new worry: that the deadly SARS virus could return and throw cold water on markets even sooner,” writes Rebecca Buckman in today’s Wall Street Journal.

“Yet while a new SARS outbreak would likely hurt economies and stock markets throughout Asia, the situation today is quite different, several investors and analysts said, meaning any impact could be more limited than it was early last year.”

“Stock markets have largely shrugged off the latest news relating to severe acute respiratory syndrome. That includes a new, confirmed case of the disease in China and a just-announced plan by Chinese authorities to cull thousands of palm civets, an animal related to the raccoon that some scientists believe carries the disease. There have been two other SARS cases among laboratory workers in the past six months.”

” ‘If SARS comes back, there will certainly be negative sentiment in the marketplace,’ says Jonathan Anderson, chief Asian-Pacific economist for investment bank UBS in Hong Kong. But he adds that SARS isn’t his main concern.”

“Last year, when the mysterious disease first hit Asia, bad sentiment quickly turned to panic, as people were afraid to travel or even leave their homes. SARS killed hundreds of people, shuttered all types of businesses and walloped industries such as tourism, transportation and retailing. Economic growth in places such as Hong Kong and Singapore came to a standstill.”

“Stock markets, particularly those in the most-affected countries, took a hammering. But now the region’s economies and markets have recovered, and economists and fund managers are more sanguine about Asia’s ability to handle SARS. The disease is ‘one of my worries,’ acknowledges Brad Aham, a senior portfolio manager with State Street Global Advisors in Hong Kong, especially in light of the developments in China.”

“However, he and other investors and analysts, including UBS’s Mr. Anderson, say they are more concerned about more-fundamental issues that could bring down Asia’s high-flying markets. Those factors include increasing stock valuations, too many new equity offerings of questionable quality and a possible interest-rate increase in the U.S.”

“Asia could better fight a SARS epidemic this time because so much more is known about the disease, officials are better prepared and panic likely wouldn’t be as widespread, economists and fund managers say. That means stock selloffs in industries such as airlines and restaurants might not be severe or durable.”

“Even more, ‘the global economy is on a much better footing than it was this time last year,’ says David Fernandez, an economist and vice-president with J.P. Morgan Chase in Singapore.”