Chinese Stocks Face Worst Market Crash In Years In Response To Coronavirus Outbreak

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Chinese stocks plunged on Monday as the coronavirus continues to plague Wuhan — the capital of Central China’s Hubei Province — and other parts of mainland China, according to Bloomberg.

The free-floating CSI Index, which comprises 300 A-share stocks listed on either the Shanghai or Shenzhen Stock Exchanges, was closed for the Lunar New Year from January 23 to February 2.

It re-opened on February 3 to drops as high as 9.1 percent — a loss of $393 billion for the Shanghai Stock Exchange — making this the worst opening the index has seen in nearly 13 years, according to Reuters.

The worst one-day crash previous to this latest one occurred in August of 2015.

“It is really hard to trade stocks,” Li Shuwei, chairman at Beijing WanDeFu Investment Management Co, told Bloomberg.

“It’s impossible to predict how this disease will develop. Even the experts have no clear idea when the outbreak will end, let alone stock traders. It’s too early to buy stocks right now and it’s also difficult to sell as all shares are limit down,” he added.

The companies hit hardest focus on consumer goods, manufacturing, iron ore, crude, and other materials. However, some healthcare companies saw the opposite effect, particularly drug store chain BOQI International Medical (BIMI), which saw their stock rise by 80 percent over a two-day span, according to Forbes.

Commodity futures weren’t the only thing to drop, however.

The yuan weakened past a key level against the U.S. dollar and could weaken further while the virus remains widespread, Bloomberg reported.

Prior to this plunge, the market had remained relatively steady despite initial news of the coronavirus outbreak in months previous. However, since the virus is spreading worldwide, investors have apparently opted to protect their investments.

“We need that certainty to make considered investment decisions,” Erik Knutzen, CIO at Neuberger Berman in New York, told Forbes.

Investors observe stock market at an exchange hall
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Following Monday’s crash, the People’s Bank of China (PBoC) immediately inserted cash into the economy in an attempt to mitigate the fiscal damage. The move ensures that there is enough liquidity in the system. The PBoC then cut its interest rates.

Though economists expected this move, some are still unsure about the economic ramifications of the virus — and the affect it will have on China and the rest of the world.

“A lot of people in the market have not been through situations like today, and you can’t blame people for wanting cash when they feel like their health is at risk,” Fang Rui, managing director at Shanghai WuSheng Investment Management Partnership, told Bloomberg on Monday.

“There’s not a lot we can do today, we are already very heavily exposed with very little remaining funds to use to buy,” he continued.

The coronavirus was first detected in December in Wuhan, China, and has since been detected in 25 countries and territories around the world. The number of fatalities has risen to 426 people in mainland China. One person has passed away as a result of the virus in Hong Kong, as has one victim in the Philippines, The Inquisitr reported.