Published: Mon, February 03, 2020
Markets | By Otis Pena

China central bank sees temporary economic impact from virus, pledges support measures

China central bank sees temporary economic impact from virus, pledges support measures

The sources said China Securities Regulatory Commission (CSRC) had issued a verbal directive to brokerages including Citic Securities Co. and China International Capital Corp.to bar their clients from selling borrowed stocks on February 3.

Chinese authorities reported Monday that the number of people infected by the virus first found in Wuhan has risen above 17,000 as of Sunday night.

In an internal memo sent to its branches, Citic called the move a "political task" aimed at helping stabilize the market on the first trading day of the stock market in the Lunar New Year of Rat as the coronavirus outbreak unsettles global markets.

China's central bank, the PBOC, on Sunday committed to pump 1.2 trillion yuan ($173 billion) into the economy.

The securities regulator said Sunday that it would halt night sessions for futures trading from Monday until further notice, and allow some share pledge contracts to be extended by as long as six months as part of measures to improve market expectations and prevent irrational behavior. China's central bank urged financial institutions to provide "sufficient credit resources" to hospitals and other medical organisations, among other measures.

The benchmark Shanghai Composite Index dived 8.73 per cent, or 259.83 points, to 2,716.70, while the Shenzhen Composite Index, which tracks stocks on China's second exchange, sank 8.99 per cent, or 158.02 points, to 1,598.80.

Provinces and cities including Shanghai have further extended the holiday break to February 9, which could limit volumes, market strategists said. Chinese universities and many schools remain closed for now.

More virus-driven market sell-off this week

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. It is also expected to keep the yuan afloat, said Stephen Innes, Asia Pacific market strategist at AxiCorp.

Technology companies, which do a lot of business with China, led the losses. The Australian dollar fell 2 percent on Monday. A preliminary trade deal signed by the US and China earlier in the month eased a big source of uncertainty in the markets.

Separately, the pound edged down after rallying Friday on the day Britain left the European Union after months of uncertainty.

Hong Kong's Hang Seng fell 6.7% last week and South Korea's Kospi dropped 5.7%.

The outbreak has only worsened since then.

The Caixin China PMI barometer of manufacturing is also due on Monday, followed later by the US manufacturing gauge from the Institute for Supply Management. Brent crude, the worldwide standard, gave up 44 cents to $56.18 per barrel.

Coronavirus: First death out of China, as toll climbs past 300
Fears over the continuing spread of coronavirus have also fueled resentment and discrimination. Most cases reported so far have been people who visited China or their family members.


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