Asian markets plumb fresh depths as virus spreads rapidly

Chinese stocks fell on Monday as coronavirus infections and deaths spiked beyond mainland China.

Southeast Asian stock markets tumbled on Monday as a sharp rise in coronavirus cases in South Korea and Italy stoked fears of a global pandemic, while Malaysia plunged to a more than eight-year low amid political turmoil.

The selldown cut across currencies, bonds and equities as investors sought to isolate their assets from the gathering storm. Markets in Thailand, Vietnam and Indonesia posted their biggest intraday drops in a month.

Chinese stocks fell on Monday as coronavirus infections and deaths spiked beyond mainland China, offsetting assurances from Beijing that it would step up policy adjustments to help cushion the blow to its epidemic-hit economy.

At the midday break, the Shanghai Composite index edged down 0.3% to 3,029.22 points, while the blue-chip CSI300 index fell 0.5%.

CSI300’s financial sector sub-index lost 0.8%, the consumer staples sector dropped 1.5% and real estate shares slid 1.8%.

Chinese H-shares listed in Hong Kong lost 1.8% and the Hang Seng Index fell 1.5% to 26,903.84. The smaller Shenzhen index gained 0.9% and the start-up board ChiNext Composite index was up almost 1%. The start-up index is up 25.1% so far this year, benefiting more from lowering financing costs and policy loosening. Investor confidence took a hit after South Korea put the country on high alert as the number of infections jumped to over 700 and deaths rose to seven. In Italy, the number of cases jumped to above 150 from just three before Friday.

Iran, which announced its first infections last week, said it had confirmed 43 cases and eight deaths. Saudi Arabia, Kuwait, Iraq, Turkey and Afghanistan imposed travel and immigration restrictions on the Islamic Republic.

Sentiment was hurt as the coronavirus outbreak spread outside China, said Linus Yip, analyst with First Shanghai Securities. U.S. and China stock markets giving up some of their recent strong gains could also add pressure on the Hong Kong market.

Losses were capped in mainland equities as Beijing vowed more support to underpin the economy and as China witnessed fewer new coronavirus cases. China will step up policy adjustments to help cushion the blow to the economy from the coronavirus outbreak that authorities are still trying to control, President Xi Jinping was quoted as saying on Sunday.

China’s central bank will take further steps to support the virus-hit economy, including releasing more liquidity and lowering funding costs for companies, a vice governor of the bank told state media.

Liquidity and policy easing are behind the strong rally in China’s start-up companies, the fundamentals of which are not currently justified, said Song Jin, an analyst with Nomura Orient International Securities.

Mainland China had 409 new confirmed coronavirus cases on Sunday, the National Health Commission said on Monday, down from 648 reported a day earlier. ** Around the region, MSCI’s Asia ex-Japan stock index lost 1.9%, while Japan’s Nikkei index was down 0.4%. The yuan was 0.08% weaker at 7.0320 per U.S. dollar, as of 0355 GMT. So far this year, the Shanghai stock index was down 0.7%, while the CSI300 index was trading 0.8% firmer. Shanghai stocks gained 1.8% so far this month.

 

"Markets have been pretty spooked by the secondary infections that they’ve seen outside of China ... truly the notion of China sneezing and everyone catching a cold, that becomes a real fright for anyone watching this," said Vishnu Varathan, head of economics at Mizuho Bank in Singapore.

"The sheer explosion of the rate in (South) Korea has been quite frightening ... there’s a sobering realisation that this could really impact hard and fast".

South Korea raised its infectious disease alert to its highest level as it reported the total number of infected patients hitting 763, while Italy sealed off some of its worst affected towns in its fight to contain what has become the biggest coronavirus outbreak in Europe.

Indonesia stocks hit more than nine-month lows, while the rupiah, which had so far been relatively isolated from virus worries due to the country’s economic independence from China, was hammered - dropping 1%.

Thai shares fell to an over three-year low as losses in the banking and industrial sectors dragged on the benchmark index. Vietnam shares dropped over 3%, hurt by the banking and real estate sectors. Consumer and banking stocks weighed on the Malaysian index, with heavyweights Public Bank and Sime Darby Plantation Bhd dropping 3.3% and 2.6% respectively.

On Sunday, Prime Minister Mahathir Mohamad’s party and other groups held surprise talks on forming a new government that would exclude his anointed successor Anwar Ibrahim.

"There’s some local drama on top of global fears (in Malaysia). There’s every reason to sell and no reason to buy," Varathan added.

Philippine stocks dropped over 2.4% on losses across all sectors, with real estate and banking stocks weighing the most on the benchmark.