Chinese equity markets reopened 8% lower after being closed since 23 January for the lunar New Year holidays. The yuan also fell by 7%.
This is despite the Chinese authorities seeking to inject around $174bn of liquidity to support asset prices, the largest financial support package since 2014.
‘While the scale of this movement is enormous in terms of daily stock market action, it essentially puts China’s market more in line with how the Hong Kong index has reacted in the past few weeks.
‘Running the numbers from when Hong Kong’s Hang Seng index market peaked on 17 January, the former index has since fallen by 9.3% versus a 10.7% drop from China’s Shanghai Composite index.’
More than 2,500 Shanghai-listed stocks traded down by the 10% permitted daily limit on Monday while the regulator moved to limit short selling and encourage insurance firms to buy stocks.
The worst hit sectors were telecommunications, industrials and technology, which all fell close to the daily 10% limit. Showing more resilience were the healthcare, consumer non-cyclicals and utility sectors which fell by between 3% and 6%.
The China Securities Regulatory Commission said it was considering unveiling a hedging instrument to offset panic in the markets and would suspend evening trading.
Economists have estimated that China’s growth may drop below 5% in the first three months of the year from 6% in the fourth quarter.
Over the weekend the death toll increased by 57 to 361 and the number of confirmed cases rose to 17,205. Meanwhile the Philippines confirmed the first death outside China.
