With the coronavirus outbreak spreading from its Wuhan epicenter across China and to other parts of Asia and the US, and Chinese authorities reporting a rising number of cases and deaths – 830 and 25 as of Friday – market watchers are taking note.

If a flurry of warnings and statements from analysts is any indication, financial markets are taking the epidemic pretty seriously.

“Are markets overreacting? Perhaps they were underreacting before the confirmation of person-to-person spreading of the virus and have been playing catch-up over the last two days,” shares Simon Powell, head of Thematic Research at Jefferies Financial Group.

“Risk aversion has taken hold across Asian [equity] markets with the sad news of more deaths due to the coronavirus in China,” notes Jasper Lawler, head of research at London Capital Group. “After a big run-up, the uncertainty of the coronavirus, US-EU trade and the impeachment trial, earnings season will really need to blow the lid off to stop a correction.”

“Inevitably, the listed transport sector [in Hong Kong and China] – airlines, airports, railways – will be most impacted, followed by the retail and hospitality sectors,” says Sean Darby, Jefferies’ global equity strategist. “Hong Kong could also face downside pressures to its economy after nearly a year of political protests forcing it into a recession.”

“Share prices of the three Chinese airlines and Cathay Pacific (CX) declined 10% and 12.8% over the past two days due to the Wuhan 2019-nCov virus,” points out Andrew Lee, equity analysts at Jeffries, on Thursday. “We believe the sector will likely remain under pressure as confirmed cases are set to rise.”

China’s gaming industry is also at risk. “On Wednesday, Macau reported its first confirmed case of the virus. This is bad timing given the importance of the Chinese New Year (CNY), which begins this weekend,” says Lee. “Even before this, the Macau government already estimated that total CNY visitation will be 6% lower.”

“While there are many unknowns at this stage, and it is still too early to assess the potential economic impact on China, the outbreak reminds everyone of the SARS outbreak in late 2002, which infected more than 8,000 people worldwide with a fatality rate of about 10%,” according to a report by Prashant Bhayani and Grace Tam, chief investment officers at BNP Paribas. “The fatality rate of the coronavirus is currently about 3%.”

“Markets, particularly Hong Kong and China equity markets, could be very volatile in the near term as markets anticipate a broader community outbreak to occur in coming months,” Bhayani and Tam add. “Beijing is very likely to step up in policy easing when there are signs that the outbreak becomes a headwind to economic growth.”