Chinese markets dropped sharply on the first day of trading after the extended Lunar New Year break, because of heightened anxiety over the fast-spreading coronavirus and uncertainty about its impact on the global economy.
The benchmark Shanghai Composite Index fell 7.7% on Monday, shedding about 2.6 trillion yuan ($375 billion) in market value in its steepest one-day decline since August 2015. The Shenzhen Composite dropped 8.4%.
The drops reflected how China was catching up with the rest of the world’s declines last week. Some exchange-traded funds that hold mainland-listed stocks fell 8% last week, foreshadowing the declines in Shanghai and Shenzhen.
Other markets in Asia were mixed on Monday, with benchmarks in India and Hong Kong rising alongside U.S. futures, while South Korean and Japanese gauges fell less than 1% each.
The offshore yuan weakened to 7.0141 to the dollar.
The selloff came even as authorities unleashed a string of both overt and less-publicized measures aimed at calming investors. China’s central bank said on Sunday that it would inject 1.2 trillion yuan ($173 billion) into the financial system.
The securities regulator last week urged investors to view the coronavirus “rationally and objectively.”
In addition, brokers were told by the regulator to suspend their securities lending businesses, meaning clients can’t borrow shares, according to two mainland-based hedge-fund investors. Such a measure means investors can’t bet on market falls by short selling, or selling borrowed stock with the aim of buying it back later at a lower price.
One brokerage described the halt in short selling as part of the “political task” of stabilizing the market, according to a screenshot of a memo that investors said originated from Orient Securities Co. An Orient spokeswoman declined to comment.
Authorities have sometimes resorted to such discreet interventions to counter volatility, especially since China’s stock market suffered a near-$5 trillion rout in 2015.
In addition, China’s top economic planner said on Monday the virus’s impact would be temporary and wouldn’t alter the positive long-run outlook. In a front-page editorial, the state-owned China Securities Journal urged investors to maintain hope, saying authorities had acted swiftly to offset pressure on the economy.
Financial bloggers were encouraged not to add to the gloom. Hou Anyang, chairman of Shenzhen-based FrontSea Asset Management and a popular financial commentator, posted a message he received from Weibo on Monday that urged him to “watch out for comments and avoid spreading negative information and mood” during this “special time.” Weibo is a Twitter-like platform that is popular in China.
“So, the market only fell slightly today?” Mr. Hou wrote to his 857,000 followers on Weibo in response.
Shares in the consumer, transportation and financial sectors in China were among the many stocks that fell by the maximum 10% daily limit. These included liquor distiller Wuliangye Yibin Co., beer maker Tsingtao Brewery Co., and brokerages such as Citic Securities, Haitong Securities and Huatai Securities.
Hainan Airlines Holding and China Eastern Airlines Corp. also shed 10% each. Transportation and tourism stocks have been among the hardest hit globally. Already, a number of airlines have canceled flights to and from China, domestic travel and business activity have dropped, and conferences have been postponed. The fear of infection is keeping many people home.
“I would be surprised if we are back to any kind of normalcy by April even in a best-case scenario,” said Bill Bishop, a China watcher, over the weekend in his Sinocism newsletter on Chinese current events. “[China’s] financial system is likely to come under extreme pressure in the coming weeks.”
Monday’s selloff came as mainland-listed Chinese stocks traded for the first time since Jan. 23, two days before the start of the Lunar New Year holiday. The markets had originally been scheduled to reopen Jan. 31, but China extended the holiday break through Sunday in an attempt to slow the spread of the new coronavirus.
Several economists and market watchers have slashed their forecasts for Chinese economic growth because of the virus.
“The disruption in China is likely to have bigger global repercussions now than in 2003,” said Ben May, director of global macro research at Oxford Economics, referring to when China was hit by the outbreak of severe acute respiratory syndrome, or SARS.
Write to Steven Russolillo at steven.russolillo@wsj.com and Xie Yu at Yu.Xie@wsj.com
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https://www.wsj.com/articles/chinese-markets-tumble-on-mounting-coronavirus-fears-11580695672
2020-02-03 09:08:00Z
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