China markets suffer steep declines as Beijing fails to stem panic selling amid coronavirus outbreak
- PBOC supplies a net US$21.7 billion to money markets on Monday to boost liquidity
- Hong Kong’s Hang Seng Index gains; Tencent, Alibaba draw buying interest
China stocks suffered steep declines as trading resumed on Monday after an extended Lunar New Year Holiday, despite efforts by the Chinese authorities to stem panic selling amid the escalating Wuhan coronavirus epidemic.
The Shanghai Composite Index fell 8.5 per cent at the open, with markets resuming trading after being shut since January 24. The benchmark closed down 7.7 per cent at 2,746.61. About 3,000 companies on the mainland’s exchanges plunged by the 10 per cent daily limit. Almost all industry groups dropped, with transport companies and brokerages leading the declines.
“In addition to investors’ concerns over the impact on corporate earnings from the coronavirus outbreak, reduced liquidity in the Chinese onshore markets and local investors’ preference for holding more cash could also exacerbate this correction,” said Tai Hui, chief market strategist for Asia at JPMorgan Asset Management in Hong Kong. “As the number of infections is still likely to rise in the weeks ahead, we would expect the Chinese onshore equity market to come under pressure.”
In Hong Kong, the Hang Seng Index rebounded 0.2 per cent to 26,356.98.
Among Hong Kong stocks seeing big turnover, Chinese social media and gaming titan Tencent Holdings gained 1.9 per cent to HK$380, while Alibaba Group Holding, the e-commerce giant and owner of the South China Morning Post, jumped 2.3 per cent to HK$205.
“People have no idea how long the situation will last, and are afraid to hold anything for long,” said Alan Li, portfolio manager at Atta Capital.