Coronavirus impact across markets hits China with an 8.2% decrease in its SSE Composite Index on Monday, the biggest fall in five years. The virus has infected 17,000 persons and more than 300 people have lost lives in China.
Many businesses in China are shut down as part of lockdown to contain the virus. The epidemic has spread to more than 20 countries around the world and the US, Australia, New Zealand, and several other countries have imposed travel bans to China.
The coronavirus impact affects the world economy and also being felt across safe-haven assets like gold and crypto-assets like Bitcoin. The investors are not moving to gold, but are reducing their exposure in all assets. The Chinese authorities have started a series of measures to tackle panic in markets.
The PBOC, central bank of China has started injecting 1.2 Trillion yuan ($175 billion) through open market operations to increase liquidity in markets. It also lowered the interest rate it charges banks for short-term funding.
Further rate cuts necessary
The Chinese government could also offer subsidies on interest payments for some companies hit by the coronavirus outbreak.
Banks could offer cheap loans to companies that make clinical masks, coronavirus testing kits and other types of medical supplies. These measures may not be successful with rising debt levels, still, further rate cuts may be necessary to infuse liquidity into the markets.
The steps taken by Chinese authorities may not be enough to prevent a sharp downturn in the first quarter. Chinese growth could come down to 5.5% in 2020 from 6.1% in 2019, and also affect major economies across the world according to forecast by Goldman Sachs.
Across the Asia-Pacific, markets were under pressure. Japan Nikkei 225 also decreased by 1.08%, the Topix index fell by 0.64%. South Korea’s Kospi was slightly lower, while Australia’s S&P/ASX 200 index was down by 1.24%.