Chinese Stock Markets Drop 9% Amid Coronavirus Outbreak
Mainland Chinese stock markets took a nosedive on the first trading day since January 23rd, after the extended Lunar New Year holiday.
The Shanghai composite indexes tumbled roughly 8.7% at the opening on Monday, while the Shenzhen composite fell 9.1% almost hitting the daily maximum permitted decline of 10% after which trading is suspended. Both indexes slightly stabilized around -7% as of the time of reporting.
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To support the markets, the People’s Bank of China announced Sunday that it will inject 1.2 trillion yuan ($174 billion) worth of liquidity through open market reverse repo operations. The move will raise total liquidity in the banking system to around 900 billion yuan more as compared to last year.
The Chinese yuan fell through the psychological barrier of seven-to-the-US-dollar for the first time since December.
The China Securities Regulatory Commission shared with People’s Daily on Sunday, that it believed the epidemic’s impact on markets would be short lived. The commission plans to call on corporate bond investors to extend debt maturity dates, and consider launching hedging tools for the A-share market to ease market panic and support firms during the period of instability.
