Stocks drop sharply as coronavirus fears grip investors

HONG KONG/BEIJING: Panic coursed through the world’s second-largest equity market as investors sold stocks on concern a deadly virus will worsen over China’s week-long trading break.

The Shanghai Composite Index settled 2.8% lower after the close of trading, the worst end to a Lunar Year in its three-decade history.

More than 90% of the mainland’s 4,000 stocks fell on volumes that were 20% above average, with foreign traders selling a record $1.7 billion worth of the shares via links with Hong Kong.

Pressure is building on Beijing to contain a new Sars-like virus that’s killed at least 17 people and infected hundreds.

The coronavirus first appeared last month in the city of Wuhan in central China, a city with 11 million residents, that’s now essentially in lockdown after officials halted public travel.

“Fear and panic are rampant,” said Wang Daixin, a fund manager at Bristlecon Pine Asset Management Ltd. “It’s hard to tell how bad things will get before a turn for the better. I didn’t get out when I had the chance to, so now I might as well sit it out rather than lose money. Others are offloading at whatever cost.”

The virus and its potential impact on the economy and financial system pose a growing challenge for President Xi Jinping.

It comes at a time when the Communist Party is seeking to maintain stability in the face of a trade war with the US, the spread of swine fever, a debt mountain, rising corporate defaults and protests in Hong Kong.

China was criticised during the Sars epidemic 17 years ago for initially providing limited information and denying the scope of the problem.

A gauge of consumer-staples stocks — some of last year’s top performers — extended this week’s loss to 6.4%, the worst since October 2018.

The final day before the Lunar New Year break is historically a good one for stock investors: since its launch in 1991, the Shanghai Composite Index had ended the session lower on only six occasions.

Shutting down Chinese markets has trained attention on the offshore yuan, as well as markets in Hong Kong and exchange-traded funds tracking Chinese stocks in New York or Europe. It will add an element of speculation to their prices before mainland bourses reopen on Jan 31.

In Hong Kong, where two cases have also been confirmed, the Hang Seng China Enterprises Index dropped 2%.

Traders, who still have today’s morning session before the break, will then return on Wednesday.