Coronavirus outbreak: Chinese stock market suffers setback of $393 billion

WION Web Team Shanghai, China Feb 03, 2020, 04.07 PM(IST)

Shanghai Stock Exchange Photograph:( Reuters )

Story highlights

The Shanghai Composite index plunged 7.7 per cent at 2,746.6 on the first day of trade in China since the Lunar New Year.

Investors disinvested $393 billion from Chinese stock market on Monday as fears about the deadly coronavirus continue to escalate.

The Shanghai Composite index plunged 7.7 per cent at 2,746.6 on the first day of trade in China since the Lunar New Year.

This was its biggest daily fall in more than four years. 

Also read: Chinese stocks crash as death toll in coronavirus mounts to over 360

The value of yuan began onshore trade at its weakest this year and was down 1.2 per cent by the afternoon itself.

It slid past the 7 dollar mark and closed at 7.0257.

Shanghai-traded commodities from palm oil to copper hit their maximum down limits.

Copper sank to its lowest in more than three years, falling by its daily limit of 7 per cent, while aluminium, zinc and lead shed more than 4 per cent and soybeans dropped 2 per cent.

Bond prices surged, with March futures contracts for 10-year bonds jumping 1.4 per cent.

Also read: China economy grew at slowest pace in 28 years in 2018

The wipeout came despite the assistance of the Chinese government to curb selling.

The People's Bank of China (PBOC) had made its biggest cash injection to the financial system since 2004.

It had injected 1.2 trillion yuan into money markets also unexpectedly cut the interest rate on those short-term funding facilities by 10 basis points.

The chances of a cut in lending rate have significantly increased, central bank adviser Ma Jun said.

China's securities regulator moved to limit short selling and urged mutual fund managers not to sell shares unless they face investor redemptions, sources told Reuters.

The total number of deaths in China from the coronavirus rose to 361 by Sunday, compared with 17 on January 23, when Chinese markets last traded.

The new virus has created alarm because it is spreading quickly, much about it is unknown, and authorities' drastic response is likely to drag on economic growth.