Coronavirus fears knock HK shares to 7-week low after Lunar New Year break

* Hang Seng, H-shares both down nearly 3%

* Virus worries push stocks down after CNY break

* Analysts see HK market struggling until China returns (.)

HONG KONG/SINGAPORE, Jan 29 (Reuters) - Hong Kong’s stock market tumbled almost 3% on Wednesday in the first trading session since the spread of coronavirus widened over the Lunar New Year holidays.

The index hit a seven-week low with shares of China-exposed stocks, financials and the travel and tourism sectors leading declines as fears about a potential pandemic of the virus, which originated late last year in Wuhan in central China, intensified.

By mid-session, the Hang Seng Index was down 2.36% at 27,290.87 in the first trading session since midday on Jan. 24. Chinese H-shares listed in Hong Kong were down 2.92% to 10,655.46.

Macau casino operators Galaxy Entertainment and Melco International Development each fell more than 5%. Airline Cathay Pacific dropped 3%.

The drop in the Hang Seng index dragged MSCI’s Asia-Pacific share index down, extending four days of falls.

China’s stock, currency and bond markets have all been closed since Jan. 23 for the Lunar New Year celebrations. They are scheduled to reopen on Feb. 3.

Fears of the spreading coronavirus have knocked global stock markets over the past week. Transport, tourism, retail and luxury stocks have been at the frontline.

Sean Darby, global equity strategist at Jefferies in Hong Kong, said the early Hang Seng reaction on Wednesday had been “very benign” and the index may have further to fall.

“They might be disappointed later on, because I suspect the maximum pain might be some time early next week once the authorities have realised that Hubei is like a massive warehouse for China,” he said, referring to the province where Wuhan is the capital city.

“Whilst you might not have lost any production, the fact is that the supply chain has got broken.”

China’s National Health Commission said on Wednesday the national death toll from the virus outbreak had risen to 132 with 5,974 confirmed cases.

With China on holiday, investors have been selling the Australian and New Zealand dollars as a proxy for the yuan. They have also been buying Antipodean sovereign bonds and U.S. Treasury debt on wagers central banks globally might have to ease policy to offset the economic drag from the virus.

Linus Yip, chief strategist at First Shanghai Securities, said there had been some bargain-hunting buying on Wednesday but the correction in markets would extend.

“Depending how the A-share market will perform on Monday, it may bring volatility to Hong Kong stock market again,” he said.

A large China ETF, the iShares Large-Cap ETF, bounced on Tuesday after hitting its lowest levels since October, but remained 9% lower than on Jan. 17.

Worries about the macroeconomic impact on the mainland and expectations of monetary easing have weighed on China’s currency too.

The offshore yuan has fallen about 1.3% against the dollar since Jan. 20 and moved closer to the 7-per-dollar level that it rallied from in late December as Sino-U.S. talks for a preliminary trade deal got under way. (Editing by Jane Wardell and Lincoln Feast.)