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Virus hitting Asian travel

Travellers are concerned about the spread of the illness.
Travellers are concerned about the spread of the illness.

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Hong Kong residents are wearing face masks to avoid catching a severe new pneumonia that has infected hundreds and can kill. CNN's Andrew Brown reports
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NEW YORK (CNN/Money) -- Mark Headley, the portfolio manager of the Matthews Asian Funds, was about to spend a month in Hong Kong visiting companies and meeting with management.

But as a deadly and mysterious respiratory illness worsened, Headley, who was travelling with his wife and 21-month-old son, joined the ranks of those canceling their trips to Asian city where ten people have died from the virus.

"There's no way I would take a kid to Hong Kong," Headley said from Australia, from where he planned to fly back to the U.S.

Travelers, event planners and tourism officials also are growing more concerned about an illness that could further hurt airlines and hotels already staggering from the sluggish world economy, war in Iraq and fears of terrorism.

Ken Fish, president of New York-based Absolute Asia, which runs tours to dozens of Asian destinations, says people have called with questions about the virus' risk, but have not cancelled trips "Clearly it's an area of concern for our clients," Fish said.

The World Health Organization says 1,622 cases and 58 deaths have been reported in 13 countries on three continents. Hong Kong, with 530 patients and 13 deaths, remains the most affected area. Eleven labs in 10 countries are working to determine the cause of the illness, characterized by a dry cough, shortness of breath or breathing difficulties.

Dutch financial group ABN AMRO was the latest investment house on Monday to cut its 2003 economic growth forecast for Hong Kong, half a percentage point, to 3.5 percent, assuming the virus can be brought under control within a month.

Quantifying the economic effects of the recently identified illness, called severe acute respiratory syndrome, is difficult.

Marc Chandler, the chief currency strategist at HSBC, which was based in Hong Kong until the territory returned to China, says the war with Iraq is having a larger effect on international commerce because the illness, though serious, still appears contained.

"If it gets bigger," Chandler said, the "wheels on globalization" could further stall and the dollar might weaken.

In a Monday editorial, the Wall Street Journal called for flights from China to be suspended to try to halt the spread of the deadly pneumonia. The paper accused the country of being "grossly negligent in refusing to sound the alarm about the disease."

The Journal editorial estimated that Hong Kong's costs "will likely be measured in the billions of dollars even if the epidemic is quickly contained."

The doctor who first identified the affliction died last week, and Argentina, France and Italy withdrew from the Hong Kong Sevens, a popular rugby tournament.

Thailand and South Korea became the latest countries to issue travel warnings urging their citizens to avoid visiting China, Hong Kong, Singapore and Vietnam -- worst hit by the disease -- until the health crisis is brought under control.

Singapore has quarantined people, while Hong Kong has shut schools.

Headley, of the Matthews Funds, expects that the illness will hurt travel and tourism in Hong Kong and Singapore. He also suspects that retail and restaurants could take a hit.

"This will be a nasty spike down in quarterly earnings and hopefully that will be the end of it," said Headley, who plans to returns to Hong Kong in September.

The illness, meanwhile, has not changed travel decisions for people like Ken Fish, the president of Absolute Asia, who said he returned from a trip to Hong Kong on March 11.

"We counsel our clients to take pause and be patient," Fish said. "There's a lot of information that comes at us very quickly."

The war in Iraq may be a more compelling travel deterrent. That was the reason given by Major League Baseball when it decided against opening the season in Japan this month.

Also blaming the war in Iraq, Hilton Hotels this month cut profits forecasts while Starwood Hotels & Resorts said it would be unable to provide financial guidance. Starwood shares are down 39 percent from their 52-week high while Hilton is off 31 percent.

The war has also been blamed for widening airline industry losses. Airlines have already lost billions of dollars since the September 11 terrorist attacks. Continental Airlines, the only airline with nonstop service between New York and Hong Kong, did not return a phone call requesting comment.

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