China stocks brace for virus hit as markets open after long break

Andrew Cummings
February 3, 2020

Authorities in China had already stepped up support measures a year ago when growth in the world's second-biggest economy slumped to a near three-decade low, as demand at home and overseas shriveled.

The CSI 300 Index dropped as much as 9.1% as onshore financial markets opened for the first time since January 23.

China's central bank said on Sunday it will inject 1.2 trillion yuan (about 174 billion USA dollars) in liquidity via reverse repo on February 3, in order to maintain ample liquidity amid the coronavirus outbreak.

The People's Bank of China made the announcement in a statement on Sunday, adding that the total liquidity in the banking system will be 900 billion yuan higher than the same period in 2019 after the injection.

The Chinese government also took measures to set up monetary and credit support for enterprises that were helping to fight the virus.

Still, market watchers will watch Monday's opening with bated breath.

The bank said it could make more cash available throughout the week.

"Whether the spread of the epidemic is effectively contained, and how much of a toll it takes on the economy are stressful for investors".

Travel and tourism shares plummeted after China curbed domestic travel to slow the virus and a growing list of foreign countries and airlines halted or reduced travel links with China.

Healthcare stocks, however, may see gains as Chinese stock up on masks and other medical supplies - and hope of potential future vaccine sales.

While shares in many sectors fell, prices for some pharmaceutical companies hit their 10% upside limit in early trading.

Global concern has dragged down stocks and major corporate names have frozen or scaled back their Chinese operations, threatening the global supply chain as so numerous world's products are manufactured in China.

A wide range of stocks are lower amid speculation that the country's GDP growth in the first quarter will slow to 4 percent.

Volume may be affected by the business closures, but China's central government has already said banks must open on Monday.

Australia evacuated 243 people, many children, from Wuhan on Monday and will quarantine them on a remote island in the Indian Ocean off its northwest coast.

Chinese equity markets dropped about 9% at the open of trading on Monday morning, setting course for their weakest Lunar New Year start in at least two decades as they returned from a break extended to contain the new coronavirus.

"The market is bracing for the bearish impact", Mingze Wu, a trader at INTL FCStone in Singapore, told Bloomberg News.

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