China Stocks fall as virus damage deepens

Mainland China equity market finished session lower on Monday, 30 March 2020, following the sharp losses on Wall Street Friday as fears mounted about the rising number of coronavirus infections around the world and its impact on the global economy dampened investors sentiment. However, market losses capped after the Chinese central bank unexpectedly lowered the interest rate on reverse repurchase agreements to 2.20% from 2.40%, as authorities stepped up easing measures to relieve pressure on the economy that has been hit hard by the epidemic. At closing bell, the benchmark Shanghai Composite Index declined 0.9%, or 25 points, to 2,747.21. The Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 2.11%, or 35.80 points, to 1,657.55. The blue-chip CSI300 index declined 0.97%, or 35.95 points, to 3,674.11.

Risk aversion selloff resumed as some traders looked to cash in on the strong gains seen in recent days, amidst deepening concerns about the economic impact of the coronavirus after latest data compiled by John Hopkins University stated the coronavirus outbreak has already infected more than 720,000 worldwide and taken at least 33,925 lives. Authorities across the globe have announced vast amounts of stimulus to stem the economic impact of the virus.

The latest news on the coronavirus underlined how, while policy makers the world over have dramatically stepped up their efforts to prevent the health crisis from becoming a financial one, the health situation itself does continue to deteriorate.

However, market losses capped after the Chinese central bank unexpectedly lowered the interest rate on reverse repurchase agreements to 2.20% from 2.40%, as authorities stepped up easing measures to relieve pressure on the economy that has been hit hard by the epidemic. China's central bank cut the interest rate it charges on loans to banks and injected 50 billion yuan (US$7.1 billion) into the financial system.

The ruling Communist Party's Politburo said the government will step up policy measures and tighten enforcement in a bid to achieve full-year economic and social development targets.

The world is now in a recession, International Monetary Fund managing director Kristalina Georgieva said on Friday, which will be worse than in the global financial crisis in 2009. Meanwhile, oil fell to levels not seen since late 2002, as supplies surge and demand collapses.

CURRENCY NEWS: China's yuan was broadly flat against the dollar on Monday, in spite of China central bank fixed softer mid-point rate, as action on a pledge by the top policymaking body for stronger steps to revive the economy supported sentiment, offsetting a rebound in the greenback in global markets. Prior to the market opening on Monday, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 7.0447 per dollar, 20 pips weaker than the previous fix of 7.0427. In the spot market, onshore yuan CNY=CFXS opened at 7.0950 per dollar and was changing hands at 7.0959 at midday, only 11 pips firmer than the previous late session close.

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