Shanghai Composite Index Plunges 8.7% as Market Reopens
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BANGKOK - China's Shanghai Composite index plunged 8.7% as financial markets reopened Monday amid news the outbreak of a deadly virus has spread further.
Other markets also fell sharply, with Taiwan's benchmark down 2.8%. The declines followed a day of bloodletting on Wall Street.
Chinese authorities reported the number of people infected by the virus first found in Wuhan has risen above 17,000 as of Sunday night. The virus has killed more than 360 people, all but one in China.
China's central bank announced plans Sunday to inject 1.2 trillion yuan ($173 billion) into the economy to cushion the shock to financial markets from the outbreak of a new virus when trading resumed. The Lunar New Year holiday, usually a week long, was prolonged by three days as a precaution.
The People's Bank of China announced several measures over the weekend aimed at stabilizing the economy as the impact of the virus spreads with cancelled flights, stepped up quarantines and other controls.
Worries over the potential harm to businesses and trade from the outbreak have triggered wide swings in share prices around the globe.
The central bank statement issued Sunday said the open market operation was aimed at ensuring sufficient liquidity.
In a separate statement Saturday, the PBOC said that while markets would reopen, financial institutions should follow local quarantine regulations and try to minimize gatherings to reduce risks of spreading the virus. That includes allowing rotating shifts, working online from home and other strategies, it said.
Regulators have also urged banks and other financial institutions to boost lending and avoid calling in debts in areas severely affected by the pandemic.
Some cities, particularly the central Chinese city Wuhan where the disease first surfaced, and nearby cities, are still in lockdown. Shanghai authorities extended the Lunar New Year holiday until Feb. 9. Universities remain closed for now.
Mainland China's main share benchmark, the Shanghai Composite sank 2.8% to 2,976.53 on Jan. 23, its last day of trading before the Lunar New Year.
Chinese authorities have massive resources for intervening to staunch panic selling of shares and have deployed them in past times of crisis.
A large share of the 1.2 trillion yuan to be injected into markets will go to meeting payment obligations falling due on Monday, analysts said.
But it's still a massive amount of funding.
“This is well beyond the band-aid fix, and if this deluge doesn't hold risk-off at bay, we are in for a colossal beat down,” Stephen Innes of AxiCorp. said in a client note Sunday.
He noted that any major drop shortly after the markets reopen would be a “catch up.”
“It's not the earthquake at the open but rather the aftershocks that will drive risk sentiment on Monday,” he said.
Shanghai Composite Index Plunges 8.7% as Market Reopens
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