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China’s economy takes a dive amid coronavirus panic

Published: (Updated: ) in Australian News by .

China’s economy has nose-dived in its first session of the week as the reality of coronavirus sinks in.

China's economy has nose-dived in its first session of the week as the reality of coronavirus sinks in.

The Shanghai Composite opened nine per cent lower while the Shenzhen Component Index also plummeted nine percent at open.

Both are still down more than seven per cent.

Stock exchanges in Shanghai and Shenzhen had been closed since January 24 for the Lunar New Year.

Markets elsewhere fell sharply last week as fears about the virus escalated.

More than 14,300 people have been infected, the vast majority of them in mainland China.

China said before markets opened that it would pump billions of dollars into its markets to keep them stable.

The People's Bank of China said Sunday that it would inject $1.2 trillion yuan (AUD $173 billion) into the Chinese markets using the purchase of short-term bonds to shore up banks' ability to lend money.

The measure will help maintain "reasonably ample liquidity" in the banking system and keep currency markets stable.

The net amount of liquidity being injected into the markets will be much lower. According to Reuters calculations using central bank data, more than $1 trillion yuan worth of other short-term bond agreements will mature Monday. That brings the net amount of cash flooding into the markets down to 150 billion yuan (AUD $32 billion).

The central bank will also keep in contact with financial institutions and markets to determine what other policy responses may be necessary, according to Pan Gongsheng, deputy governor of the central bank.

China's financial regulators announced dozens of other measures to maintain financial stability and help the economy. Regulators also said they would offer more financial services to individuals and companies, among other moves.

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Markets elsewhere in Asia opened lower Monday, too. Japan's Nikkei 225 fell 1.5 per cent in early trading. Twenty cases have been confirmed in the country.

South Korea's Kospi fell 1.6 per cent. There are 15 confirmed cases in that country.

Last week, Europe's broad STOXX 600 fell 0.9 per cent in early trade, with indexes in Frankfurt, Paris and London lost between 0.7-1.3 per cent.

Australian shares take a hit

Australia's shares have also taken a hit amid fears of a potential economic fallout from the deadly coronavirus.

The broader All Ordinaries index fell 114.7 points, or 1.61 per cent, to 7006.5.

Gold miner shares rose as the price of gold lifted, driven higher by the uncertainty caused by the coronavirus.

Newcrest Mining was up 28 cents, or 0.95 per cent, at $29.81 and Evolution Mining rose 8.5 cents, or 2.29 per cent, to $3.79.

But most stocks were lower.

Travel shares were pummelled again. Qantas lost 14 cents, or 2.18 per cent, to $6.72 and Flight Centre was down 66 cents, or 1.68 per cent, at $38.65.

Gas and oil producer Oil Search's shares were down more than 7 per cent to $6.73.

The whammy for the PNG producer came after it told the market the PNG government has ended negotiations about the massive P'nyang gas expansion.

Big miners were also lower, with Fortescue Metals Group losing 36 cents, or 3.16 per cent, to $11.03.

There is a slew of local financial data to come this week, including the RBA rates decision on Tuesday, and the company reporting season kicks off.

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Building approvals slipped in December, the market learned on Monday, though not by as much as the market feared.

The Australian dollar was buying 66.96 US cents at midday, down from 67.19 US as the market closed on Friday.

With wires.

Source: 9News

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