Chinese stocks sink 9% as markets reopen to crisis after break

  • Markets
  • Monday, 03 Feb 2020

HONG KONG: Chinese stocks plummeted by the most since an equity bubble burst in 2015 as they resumed trading to the worsening virus outbreak.

The CSI 300 Index dropped as much as 9.1% as onshore financial markets opened for the first time since Jan. 23. China’s benchmark iron ore contract fell by its daily limit of 8%, while copper, crude and palm oil also sank by the maximum allowed. The yield on China’s most actively traded 10-year government bonds dropped the most since 2014. The yuan weakened 0.8% to the cusp of 7 per dollar.

The rout comes as regulators unleashed targeted measures to help blunt the pain for companies, banks and individuals, as well as pledging financial stability. China injected cash into the financial system Monday, with the central bank seeking to ensure ample liquidity as markets plunge. It cut the rates on the funds by 10 basis points. Officials also urged investors to evaluate objectively the impact of the coronavirus, which has killed more than 360 and spread to more than 17,000 people.

Read more about China’s latest support measures The CSI 300 pared some losses to trade 7% lower at 9:57 a.m. in Shanghai. Declines were led by telecom, technology and commodity producers. Hong Kong’s Hang Seng Index, which dropped 5.9% in three days of trading last week, rose 0.6%.

The People’s Bank of China added 900 billion yuan ($129 billion) of funds with seven-day reverse repurchase agreements at 2.4%. It will also inject 300 billion yuan with 14-day contracts at 2.55%. While the total is the largest single-day addition of its kind in data going back to 2004, it implies a net injection of just 150 billion yuan as more than 1 trillion yuan of short-term funds mature.

The outlook for China’s onshore markets was already bleak when investors went on holiday last month. The Shanghai Composite Index sank 2.8% on Jan. 23, its worst end to a Lunar Year on record.

The outbreak is leaving China increasingly isolated. The U.S., India, Australia, Indonesia, Singapore, Israel, Russia, New Zealand and the Philippines have all imposed restrictions on visitors from China. In Hong Kong, the government said it was studying further controls on travel from the mainland in response to a planned strike by medical workers aimed at pressuring the government to shut the border with China. - Bloomberg

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