Horrified by the coronavirus spread statistics, investors are dumping their shares in Shanghai and Shenzhen.
The Shanghai Composite Index (000001:SH) lost 8.13% in the early trading on February 2. Its Shenzhen counterpart (399106:SZ) fell by 8.3%. The total market cap of the Star Market-listed tech stocks shrank by 14.27%, with more than CNY 166.46 billion (USD 23.73 billion) of value disappearing.
The country’s largest stocks plummeted as well: Hong-Kong listed financial giant ICBC (601398:SH) went down by 6.82%; China Construction Bank (601939:SH), another H-share, fell by 7.32%; Ping An Insurance (601318:SH) lost 7.49%. Combined, the three had more than CNY 380.91 billion (USD 54.38 billion) in market cap wiped out in the morning session.
At the same time, new China’s tech shares were doing even worse. Over 20 Star Market-listed companies hit the -20% daily price limit as of the midday break. Chipmaker Montage Technology (688008:SH) declined by 19.69%; AMEC (688012:SH), who had a perfect 2019, dropped by 15.27%; the ‘Mobile king of Africa’ – Shenzhen-based smartphone maker Transsion (688036:SH) – took a 6.93% plunge.
Some of the biotech stocks – most of which countrywide were rock-solid two weeks ago – tanked. For one, animal vaccine maker Shen Lian Biomedical – which went public last fall amid the swine fever crisis – slipped by 16.97% within two hours of open-market transactions on Monday.
This is the first slump of such magnitude in the board’s several-month-long history. (Check out our research on how the new tech marketplace was performing in the fourth quarter of 2019.)
A few days ago, EqualOcean reported on the first ‘symptoms’ of this stampede, indicating that the combined market capitalization of 70 companies that went public last year in the new venue dropped by 3.2% on January 23 – the date when the city of Wuhan (where, most likely, the current epidemic started) was put on lockdown.
As the novel coronavirus (2019-nCoV) outbreak is yet to reach its pinnacle, concerns abound about damage brought by the disease to China’s economy. Facing the highest level of the systematic risk-related uncertainty, money-managers are escaping from the mainland’s public equity markets.
Economists’ opinions vary regarding how heavily the virus can hit the global output. Some of them are already talking about twelve-digit numbers. Meanwhile, many international corporations are freezing their operations in China and implementing drastic measures, such as employee travel restrictions.
Some possible short-term winners might appear in this disastrous situation. One example is that prolonged quarantine can benefit e-commerce companies, like Meituan Dianping (3690:HK), as more people stay home and shop online.