SHANGHAI/HONG KONG - Investors erased $420 billion from China's benchmark stock index on Monday, sold the yuan and dumped commodities as fears about the spreading coronavirus and its economic impact drove selling on the first day of trade in China since the Lunar New Year.
By lunchtime, the benchmark Shanghai Composite index sat 8% lower near an almost one-year trough and poised to post its worst day in more than four years. The new virus has created alarm because it is spreading quickly, much about it is unknown, and authorities' drastic response is likely to drag on economic growth."It's uncertain whether factory workers, or how many of them, will return to their factories," she said."We haven't yet seen corporate earnings since the coronavirus. Restaurants and retailers may have very little sales.
Amid the selldown, the People's Bank of China injected 1.2 trillion yuan into money markets through reverse bond repurchase agreements. It also unexpectedly cut the interest rate on those short-term funding facilities by 10 basis points. "They are managing the situation well. The timing of the repo rate cut came a little quicker than some people were expecting, but they wanted to send a clear message."