‘Sell on Friday’ is China stock traders’ hedge against coronavirus jitters and weekend blues
- Traders in China and Hong Kong unwind stock holdings preceding recent weekends to avoid uncertainty of the virus outbreak
- The Hang Seng Index fell on two out of the past three Fridays and CSI 300 Index dropped on one occasion of such trading days over the past two weeks
Dialling back risk appetite before the weekend appears to have some traction, going by trading patterns this year. The MSCI All Countries World Index has posted declines in five of the seven Fridays, after the killing of an Iranian top general on January 3. Investors avoided a 0.5 per cent loss on average on those occasions.
The Hang Seng Index has fallen in two of the past three Fridays since the Hong Kong market reopened after the Lunar New Year, suggesting traders are taking few chances. The CSI 300 Index, which tracks the nation’s biggest companies on the Shanghai and Shenzhen exchanges — has dropped in one of two Fridays since the onshore markets restarted on February 3.
“As the uncertainty increases, more people for sure will join the rank of selling shares on Fridays to shield from possible bad news on weekends,” said Chen Hao, a strategist at KGI Securities in Shanghai. “Investors are worried that there will be a resurgence in the disease outbreak.”
Stocks in China and Hong Kong had largely been impervious to the jitters in global markets this year. A “phase one” deal as a tentative between Beijing and Washington has helped counter a sell-off as well as fuelled optimistic buying. Then came the coronavirus.
The outbreak has proved to be more contagious than the Sars (severe acute respiratory syndrome) outbreak that ravaged China and the rest of the world in 2003. It has infected more than 70, 000 people and killed at least 2,100 in mainland China, surpassing the tally in the previous epidemic.