Fri, Jan 24, 2020 page5

• Chinese stocks plunge in worst-ever end to lunar year

  • Bloomberg
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  Panic coursed through the world’s second-largest equity market as investors sold stocks on concern a deadly virus will worsen over China’s week-long trading break.

  The Shanghai Composite Index settled 2.8 percent lower after the close of trading, the worst end to a Lunar Year in its three-decade history.

  More than 90 percent of the mainland’s 4,000 stocks fell on volumes that were 20 percent above average, with foreign traders selling a record US$1.7 billion worth of the shares via links with Hong Kong. The yuan weakened as much as 0.4 percent and government bond futures rose to the highest since 2016.

  Pressure is building on Beijing to contain a new SARS-like virus that has killed at least 17 people and infected hundreds. The coronavirus first appeared last month in the city of Wuhan in central China, a city with 11 million residents — more than in London or New York — that is now essentially in lockdown after officials halted public travel.

  “Fear and panic are rampant,” Bristlecon Pine Asset Management Ltd fund manager Wang Daixin (王代新) said. “It’s hard to tell how bad things will get before a turn for the better. I didn’t get out when I had the chance to, so now I might as well sit it out rather than lose money. Others are offloading at whatever cost.”

  The virus and its potential impact on the economy and financial system pose a growing challenge for Chinese President Xi Jinping (習近平). It comes at a time when the Chinese Communist Party is seeking to maintain stability in the face of a trade war with the US, the spread of swine fever, a debt mountain, rising corporate defaults and protests in Hong Kong.

  A gauge of consumer-staples stocks — some of last year’s top performers — extended this week’s loss to 6.4 percent, the worst since October 2018. The Lunar New Year is a typically strong season for traveling and spending as families gather for the celebrations. Macau casino stocks also tumbled as the city reported its second case of the novel coronavirus and announced it would cancel all Lunar New Year festivities.

  In Hong Kong, where two cases have also been confirmed, the Hang Seng China Enterprises Index dropped 2 percent and the Hang Seng Index fell 1.5 percent.

  The final day before the Lunar New Year break is historically a good one for stock investors: since its launch in 1991, the Shanghai Composite Index had ended the session lower on only six occasions.

  Without being able to trade for a week, investors are heading into the holiday blind. After an extended break in May, the Shanghai Composite fell 5.6 percent as investors reacted to escalating trade tensions with the US. The sell-off wiped out almost half a trillion US dollars from Chinese equity values.

  Guangdong Xiaoyu Investment Management (廣東小禹投資管理) managing director Li Shiyu (黎仕禹) told Bloomberg News that a turnaround in sentiment would depend on the number of new cases in coming weeks.

  “The epidemic may reach a peak in two weeks and hopefully start to slow,” he said. “If there is a trend for new cases to decline, I would consider buying shares again.”
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