- Chinese stocks suffered their worst losses in several years
- Markets gripped by Coronavirus fears
- Government plans to inject $173 billion to stimulate market
As markets opened for trading in China for the first time since an extended Lunar New Year break, the fear recent weeks took hold. This fears have been built up by the spreading Corona virus which has now killed more than 300 people and continued to spread far beyond its Wuhan epicenter. Today marks the first time that the markets have been able to express their sentiment since the January 24th closure, and it does not make for pleasant viewing.
Almost $500 Billion in Value Wiped Out
The Chinese stock market can be a volatile place at the best of times, but with losses at $445 billion and counting since the market reopened, these are some of the most turbulent times in many years. This is due in the most part to the fact that the cases of Coronavirus have run rampant during the holiday break.
Stock markets have plummeted with the worst days in Shanghai seen since 2015 and in Shenzhen for more than a decade in terms of single day loss figures. The forex market too has been impacted heavily by the downturn.
RMB Forex Trading Down
Chinese RMB currency trading is heavily restricted. Due to that, it can often be difficult to get a true picture of the value the currency really has. What we can say though is that the RMB, both in onshore, and offshore trading, has lost more than 1.5% onshore since market opening today. This slides it below the benchmark 7 to 1 US Dollar.
As one of the country’s biggest trading partners, Australia, and the Australian Dollar are often viewed as a proxy by analysts looking to gain more insight into the Chinese economic situation. In this case then, bad news too as the Australian Dollar continued to slip toward a 10-year low point. All the signs at the moment being quite negative for China and Asian markets in general.
Stimulus on the Horizon
Economists have predicted that the Chinese economy could shed as much as 2% this quarter. That would be a huge blow to one of the world’s largest and most dominant economies that many already believe is struggling in silence. To help negate that risk, Beijing have committed to a huge market cash injection of $173 billion. This should help tide the market over and provide the much needed support to banks so that they can continue lending and the economy continue slowing.
As the Coronavirus toll rumbles on with no end in sight though, the true extent of the economic problems it will cause remains to be seen. For now, the global forex market along with stock markets across Asia and the world, wait in hope for some light at the end of the tunnel.[table “14” not found /]