Beijing: Investors erased $393 billion from China’s benchmark stock index, 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, the media reported.
A nearly 8 per cent plunge on the Shanghai composite index was its biggest daily fall in more than four years. The Chinese yuan blew past the 7-per-dollar mark and Shanghai-traded commodities from palm oil to copper hit their maximum down limits.
Shanghai-traded oil, iron ore, copper and soft commodities contracts all posted sharp drops, catching up with sliding global prices.
Since the outbreak of 2019-nCoV that has so far killed around 425 people and infected over 20,000 people, Hubei province’s Wuhan city has been placed under a lockdown and 30 other provinces required to follow restrictions.
While the multinational giants like Apple, Starbucks and Ikea have shut down their stores temporarily, many countries are in the process of suspending air travel to and from China. India suspended air travel from China and declared all its visas for the Chinese and foreign nationals living in China ‘invalid’. The Oxford Economics in the meantime has estimated that China’s economic growth will slip down to 5.4 per cent from 6.1 per cent due to the epidemic.
The authorities in Beijing are worried that if the country is declared as an “epidemic area”, it will harm China’s three main sectors — trade, manufacturing and service.
Blocking of air, sea and land routes by major trade partners, will have a negative impact on China’s trade amidst an already prevailing slowdown, the authorities fear. Indefinite halt in manufacturing operations especially electronics and automobiles, in Wuhan, a major business center, may disrupt the global industrial chains, sources said. The government also apprehends that consumer industries such as tourism, catering, entertainment and logistics, in particular for small and medium sized enterprises, will face enormous stress.
Profits of China’s major industrial firms have already dropped 3.3 percent in 2019 from the previous year, Beijing revealed on Monday.
The Central bank has already put trillions of Yuan into the financial market in the last few days in order to restore investor confidence which has been eroding due to rapid spread of the epidemic.