Markets in China closed on January 24 for the annual Lunar New Year holiday, but since then the viral epidemic that started in Wuhan has spread around the world, dragging down stocks and threatening the global supply chain. — Reuters pic
SHANGHAI, Feb 3 — China’s stock markets are expected to sink today when they re-open after an extended holiday break due to worries over the impact the coronavirus will have on the economy.
Markets in the world’s second-biggest economy closed on January 24 for the annual Lunar New Year holiday, but since then the viral epidemic that started in Wuhan has spread around the world, dragging down stocks and threatening the global supply chain.
The reaction to the growing epidemic is not expected to be pretty when markets open in Shanghai today at 0930am (0130 GMT).
But, as analysts predicted, the government is already marshalling forces to contain the economic fallout.
China’s central bank said yesterday it would pump 1.2 trillion yuan (RM709.8 billion) into the economy as it anticipates the fallout from the virus.
The People’s Bank of China (PBOC) said in a statement it would launch the reverse repurchase operation today to maintain “reasonable and abundant liquidity” in the banking system, as well as a stable currency market, during the epidemic.
The bank also announced a day earlier it would step up monetary and credit support for enterprises helping the fight against the virus, such as medical companies.
Still, market watchers will watch today’s opening with bated breath.
“Investors will release their emotions at first and then make further decisions based on the epidemic situation and the potential stimulus measures rolled out by the government,” said Zhang Qi, an analyst with Haitong Securities.
“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, tourism and hospitality shares may take the brunt of selling after China curbed domestic travel to slow the spread of the virus.
A growing list of foreign countries and airlines have also 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.
Individual Chinese stocks are limited to a 10 per cent daily move in either direction, after which trading in those shares is suspended.
‘Large’ economic impact
China’s economy is expected to take a clear hit from the crisis, which has brought industrial regions grinding to a halt.
The financial centre of Shanghai — and key manufacturing provinces in the south and east — are among regions that have ordered business closures for at least another week.
Many foreign companies have also temporarily halted operations in China.
“The near-term impact on Chinese GDP growth is likely to be large,” Oxford Economics said in a research note.
“Considering the affected areas account for just over 50 per cent of total Chinese output, we think this could lead China’s annual GDP growth to slow to just four per cent in Q1,” it added — down from a previous forecast of six per cent growth.
Volume may be affected by the business closures, but China’s central government has already said banks must open today.
It is not clear how many brokerages will operate at full capacity today.
Markets had been scheduled to re-open on Friday after the week-long Lunar New Year holiday, but that was extended by the government to buy time in the fight against the virus.
“The market is bracing for the bearish impact,” Mingze Wu, a trader at INTL FCStone in Singapore, told Bloomberg News.
“I’m looking at one-sided bearish movement today, and potentially for the foreseeable future until the situation improves.” — AFP