SHANGHAI, March 13 — Chinese shares and government bond futures fell today, tracking global markets downwards after a meltdown triggered by intensifying fears over the spread of coronavirus around the world.
But equities losses were muted compared with other markets, checked by hopes that the virus outbreak was under control in China itself, and on expectations of further fiscal policy easing by Beijing to underpin the world’s second-largest economy.
The benchmark Shanghai Composite Index ended 1.2 per cent lower, while the CSI300 shed 1.4 per cent, after having dropped as much as 4.2 per cent and 4.7 per cent, respectively. For the week, SSEC was down 4.8 per cent, while CSI300 dropped 5.9 per cent, versus a 16.5 per cent in the S&P500 index.
Chinese A-shares have fallen less than their global counterparts in recent weeks as the spread of the coronavirus has slowed domestically and many factories have slowly resumed work after lengthy virus-related stoppages.
In a sign that regulators were closely monitoring the market, the China Securities Investor Protection Fund Corp, directly supervised by China’s securities watchdog, ran a poll on Friday seeking investors’ views on why the A-share market slumped in early morning trade, and whether it will continue to be impacted by overseas markets.
China assets are stronger than assets in other markets, said Zhang Gang, an analyst with Central China Securities, as the coronavirus outbreak has been quickly brought under control in the country, while it just begun to spread overseas.
Expectations are running high for cuts in reserve requirement ratios (RRR) and interest rate, even though Beijing has already taken a raft of measures to underpin the economy, Zhang said.
Wuhan, ground zero of the new coronavirus outbreak, reported just five new cases on Friday, while no locally transmitted infections were reported in the rest of the country.
The virus is now spreading rapidly in many of China’s trading partners, however, threatening to shock global business and consumer spending directly and through increasingly volatile financial markets.
“The epidemic has been well contained in China. Also, liquidity has been ample in China,” said Zhaopeng Xing, markets economist at ANZ in Shanghai. “China’s policymakers also acted earlier than other countries, hence we have less volatility than other markets.”
In the currency market, the yuan reversed earlier losses to rise 0.51 per cent against the dollar.
The People’s Bank of China set its daily fixing for the yuan’s trading band at 7.0033 per dollar, 0.56 per cent weaker than the previous fix of 6.9641. It was the biggest one-day weakening in percentage terms since February 4, and much weaker than market expectations.
The onshore yuan opened at 7.0300 per dollar and was changing hands at 6.9920 as of 0710 GMT, after falling 0.4 per cent at one point.
Traders said investors continued with rangebound trading strategies, but with levels moving downward. Two traders said they saw many market participants selling dollars when the spot rate approached 7.04 to trim the losses in the yuan.
A chief dealer at a Chinese bank said the yuan’s short-term outlook will depend on major economies’ policy direction. A growing number of countries and central banks are announcing emergency fiscal and policy support measures to cope with the pandemic.
“Most central bank policy measures should be confirmed this week and next,” he said.
Some analysts expect another cut to China’s benchmark lending rate (LPR) next Friday, following various easing measures taken since late January.
Chinese 10-year government bond futures lost their early composure and gave into selling pressure as market ructions spooked traders. The most-traded contract, for June delivery was last down 0.48 per cent at 101.005.
“There are huge doubts about the ability of Europe and the US to control the outbreak, and a flight to liquidity has dragged all assets lower,” said a senior trader at a brokerage in Shanghai. — Reuters
