China Stocks fall amid coronavirus crisis

Mainland China equity market finished session lower on Friday, 13 March 2020, on escalating fears about the economic impact of the novel coronavirus. Market losses were, however, capped after China cut the reserve requirement ratio for some banks, unleashing US$78 billion of liquidity or new lending. At closing bell, the benchmark Shanghai Composite Index dropped 1.23%, or 36.06 points, to 2,887.43. The Shenzhen Composite Index, which tracks stocks on China's second exchange, declined 1.08%, or 19.57 points, to 1,798.99. The blue-chip CSI300 index shed 1.41%, or 55.60 points, to 3,895.31.

The coronavirus outbreak, which originated in China, has cast a shadow over the global economic outlook. More than 132,000 infections have been reported worldwide - including clusters of outbreaks on both coasts of the US - and nearly 5,000 people have died from the coronavirus, which began in Wuhan, in mainland China.

 

Market losses were, however, capped after China on Friday cut the reserve requirement ratio for some banks, unleashing 550 billion yuan (US$78 billion) of liquidity to support the world's second largest economy from a deeper slowdown. It also pledged to support tourism and culture industries in the post-epidemic era.

Also, sentiment improved after Australia's central bank injected an unusually large amount of cash into the financial system on Friday while South Korea's central bank said it could inject liquidity if needed and that its board was discussing whether to hold a rare inter-meeting review that could cut interest rates. Meanwhile, the US Federal Reserve overnight injected US$500 billion into the US banking system and pledged to add another US$1 trillion.

ECONOMIC NEWS: Foreign direct investment (FDI) into China fell 8.6% in January-February to 134.4 billion yuan ($19.26 billion) compared with a year earlier, dragged down by the coronavirus pandemic, a commerce ministry official said on Friday. In February, FDI into China plunged 25.6% on-year to 46.83 billion yuan.

CURRENCY NEWS: China's yuan weakened 0.4% as investors scrambled for the safety of U.S. dollars. The People's Bank of China set its daily fixing for the yuan's trading band CNY=PBOCat 7.0033 per dollar, 0.56% weaker than the previous fix of 6.9641.

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