Chinese stocks tumbled as traders returned from an extended lunar new year holiday despite a promise from the central bank to pump liquidity into the financial system to help cushion the blow of a deadly coronavirus outbreak.
The CSI 300 index of major Shanghai- and Shenzhen-listed equities dropped as much as 9.1 per cent at the open on Monday with losses across the board. That puts the benchmark on track for its worst-day performance since August 2015.
China had reported 17,205 confirmed cases of the coronavirus and 361 deaths as of the end of Sunday.
The fall in equity markets even though the central bank announced on Sunday it would provide Rmb1.2tn ($173bn) in additional liquidity to money markets in the largest one-day open market operation since 2004. That was on top of 30 measures across five ministries and regulators meant to provide financial support to industries seriously affected by the outbreak.
Price movements for most individual stocks listed in mainland China are capped at 10 per cent in either direction.
The onshore renminbi weakened 1 per cent to Rmb7.0048, falling back through the key seven-per-dollar threshold. The less-regulated offshore rate traded flat at Rmb7.0029.
The People’s Bank of China also cut its seven and 14-day reverse repo rates by 10 basis points shortly after markets opened to 2.4 per cent and 2.55 per cent, respectively. That lowered the cost of short-term loans from the central bank and boosted interbank liquidity through the seven-day rate for the first time since November.
Investors are concerned that the epidemic will hit China’s economy, already growing at its slowest rate in 30 years. Li-Gang Liu, chief China economist at Citi, forecast that first-quarter economic growth would slow to 4.8 per cent. The Chinese economy grew by 6.1 per cent in 2019.
“Given China’s much larger services sector weight in the economy than that in 2003, it is unlikely the economy will experience a quick rebound once the outbreak is under control,” he added.
Commodities tied to China’s economic outlook tumbled, including iron ore — down 8 per cent in Dalian — and copper, which fell 7 per cent in Shanghai.
Onshore crude oil futures in Shanghai fell 7.2 per cent. Brent crude — the international benchmark — slipped 0.8 per cent in morning trading to $56.15 a barrel.
China’s markets were shut all of last week for an extended lunar new year holiday. Hong Kong’s Hang Seng China Enterprises index — which tracks Chinese companies listed in the city — finished the week down 6.7 per cent.
The HSCEI rose 0.4 per cent on Monday, while Hong Kong’s Hang Seng index was little changed.
Additional reporting by Alice Woodhouse
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February 03, 2020 at 08:40AM
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Chinese stocks plunge as coronavirus fears grip market - Financial Times
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