China Stocks joins global selloff

Mainland China equity market finished session steep lower on Monday, 16 March 2020, joining regional market risk-off selloff, amid deepening concerns over economic impact of coronavirus after the US Federal Reserve slashed its benchmark lending rate from 1 to 1.25 percent to 0-0.25 percent and also launched a new round of quantitative easing worth $700 billion to help the U.S. economy deal with the effects of the coronavirus. Meanwhile, selloff intensified after Chinese data underscored just how much economic damage the disease has already done to the world's second-largest economy, with official numbers showing the worst drops in activity on record. Industrial output plunged 13.5% and retail sales 20.5%. At closing bell, the benchmark Shanghai Composite Index dropped 3.4%, or 98.17 points, to 2,789.25. The Shenzhen Composite Index, which tracks stocks on China's second exchange, declined 4.83%, or 86.97 points, to 1,712.02. The blue-chip CSI300 index shed 4.3%, or 167.47 points, to 3,727.84.

The coronavirus outbreak, which originated in China, has cast a shadow over the global economic outlook. The Fed's emergency 100 basis point rate cut on Sunday was followed on Monday by further policy easing from the Bank of Japan in the form of a pledge to ramp up purchases of exchange-traded funds and other risky assets. New Zealand's central bank also shocked by cutting rates 75 basis points to 0.25%, while the Reserve Bank of Australia (RBA) pumped more money into its financial system. South Korea cut rates and Russia rushed together a $4 billion anti-crisis fund.

 

The People's Bank of China offered CNY 100 billion or $14.3 billion into the financial system via one-year medium-term lending facility on Monday. But the bank kept the rate at 3.15 percent. China's central bank added more funds into the banking system but kept its borrowing cost unchanged after the US Federal Reserve unexpectedly reduced the interest rate by 100 basis points. The central bank last week had reduced the reserve requirement ratio by 50-100 basis points for qualifying banks to shore up the economy hit by the outbreak of covid-19. This was the second cut in RRR this year.

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