Regulator, financial experts say impact won’t last indefinitely
The black swan-like coronavirus outbreak in China will send the stock markets in the Chinese mainland down, maybe sharply, in the short term but won’t change the long-term trend of the A-share markets, China’s securities regulator and financial experts said on Sunday.
The regulators are seeking to inspire confidence in the market at a time when the sudden outbreak has driven down global markets and raised concerns whether it would cause a greater blow to domestic shares when trading reopens on Monday after the extended Spring Festival holidays.
“The impact of the coronavirus on the market will be temporary and it won’t change the medium- and long-term stock market trend,” a spokesperson from the China Securities Regulatory Commission said on Sunday.
The two stock exchanges in Shanghai and Shenzhen both issued statements in which they suggested investors should analyze the coronavirus impact in a rational manner.
The two mainland markets dived on January 23, the last trading day before the Spring Festival holidays over worries about the coronavirus outbreak. Hong Kong’s benchmark Hang Seng Index has slumped by more than 8 percent since January 20.
Experts predicted that the A-shares’ correction will continue on Monday. One employee at a private fund company surnamed Liang said on condition of anonymity that mainland markets might tumble as much as 6-8 percent on Monday.
Analysts from Shanghai-based private fund Shifeng Asset also made a similar forecast of an approximately 6 percent dive on Monday.
Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology, was more upbeat and said that panic selling won’t happen on Monday.
“The two markets will fall on Monday as the negative news accumulated during the holidays needs to be reflected in the capital markets, but it is unlikely to be a dramatic slump as most investors already have a relatively rational understanding of the crisis,” Dong said.
Although analysts and industry insiders disagreed about how much A-shares would tumble, they agreed that the influence of the epidemic will be a short-term one and the market will rebound as soon as the virus is brought under control.
“For the whole year, the A-share market will still edge up and may even turn in a better performance than in 2019,” Dong said.
Some industry insiders said that the epidemic provides opportunities for financial institutions to do bargain hunting in the next couple of weeks. “They won’t act immediately on Monday but will likely wait until the short-term bottom emerges, which I predict would be around 2,500 points at worst,” said Kang Chongli, director of the strategic department of Lianxun Securities. He anticipated that the bottom might appear in April or May after listed companies report their first-quarter business performance.
Yingda Securities chief economist Li Daxiao also said that the epidemic is an “opportunity” in his perspective, but didn’t reveal the company’s investment plan.
Dong said that overseas institutions will likely do bargain hunting in the coming weeks. “Overseas capital has been sensitive about the epidemic and it flowed out on the last trading day before the Lunar New Year. Those international investors who focus on short-term, speculative trading are likely to return shortly to take any opportunities that present themselves amid this volatility,” he said.
The trading floor of the Shanghai Stock Exchange in Shanghai Photo: CFP
