Stocks Crash over 7% on China Due to Coronavirus as Markets Reopen after New Year Holiday

UTC by Tolu Ajiboye · 3 min read
Stocks Crash over 7% on China Due to Coronavirus as Markets Reopen after New Year Holiday
Photo: Unsplash

As market trading resumed in China after the holidays, stocks crashed over 7% being influenced by the effects of the coronavirus fears. China has pumped over 1 trillion yuan in rescue.

As it was predicted by market analysts last week, the coronavirus epidemic plunged stocks in mainland China as markets reopened. The markets had remained closed because the government extended the Lunar New Year Holiday in efforts to curb the spread of the outbreak. Before now, the world was already feeling the effects of the spread. Several financial markets had plunged and now, China has joined the plunge.

Coronavirus Crashes Stocks in China

On Monday, stocks generally crashed by at least 7%. The Shanghai Composite plunged by 7.72% and closed at 2,746.61. The Shenzhen Composite saw a larger crash closing at 1,609 after falling 8.414%. The Shenzhen component also fell by 8.45%, closing at 9,779.67. In general, almost $400 billion has been pulled off stocks in China by wary investors who are worried about losing their positions.

China Struggles to Help Stocks as Coronavirus Rages

Since the coronavirus outbreak began, the entire country has somewhat been in disarray. As the situation continues to worsen and affect financial markets, the Chinese government is adopting palliative measures in finance. The People’s Bank of China said it will pump 1.2 trillion yuan (about $173 billion) into the market to improve liquidity.

Regardless of this move, there are arguments that it might not exactly do much for the markets, even in the short term. DBS Group Research in Singapore has put an argument forward. It’s strategists wrote:

“While this will be the largest single-day addition since 2004, it implies a mere net injection of RMB150bn as commercial banks are scheduled to repay RMB1.05tn of funds on Monday. The authority may need to inject more cash in the rest of the week via reverse repo and/or medium-term lending facility to soothe market nerves.”

Coronavirus So Far

According to China’s Health Commission, there were a total of 361 deaths as of Sunday. This is already worse than the SARS outbreak back in 2003. Back then, China reported that the outbreak killed 349 people. The virus has now spread to at least 24 countries.

However, in general, SARS had a higher mortality rate. About 9.6 percent of confirmed infections died at the time with the coronavirus just a little over 2 percent at the moment. Confirmed cases now sit at 17,205.

The Chinese government has also expressed some displeasure with the United States. According to the government, the U.S. worsened public panic and was the first to evacuate embassy employees. China also says the U.S. was the first to issue a travel ban and did all these without extending any help to the Chinese.

The Health Commission has however said that 475 people had recovered from the infection. It also said that the increase in treated cases means that it might be better than SARS was.

China is also set to begin receiving infected patients in its new 1,000-bed hospital. The hospital, in Wuhan, reportedly took less than 10 days to build. Reuters reports that another Wuhan hospital, big enough for 1,600 beds, will be ready in 2 days.

Currencies, Market News, News, Stocks
Tolu Ajiboye
Author Tolu Ajiboye

Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.

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