Chinese Markets Act Like There’s Little Risk Left From Virus

(Bloomberg) --

Beijing’s coordinated push to support financial markets in the wake of the virus outbreak has been so effective, Chinese investors are now better off than most of their peers in the region.

Resilient to increasing caution in Asian markets as the coronavirus outbreak spreads in the region, the CSI 300 Index of stocks rose as much as 1% Friday, with daily turnover topping 1 trillion yuan ($142 billion) for a third time this week. Chinese government bonds are also on a tear, while the yuan remains near the strongest since August against a basket of trading partners’ currencies. Volatility across all assets has tanked.

While this month’s gains in Chinese stocks follow their worst end to a Lunar Year on record, they stand out against shares in places like Japan, South Korea or Hong Kong, where a surge in cases is renewing concern among investors. The Kospi Index lost 1.5% in Seoul on Friday and the local currency weakened, while the Nikkei 225 Index slipped 0.4%. China’s CSI 300 Index has outpaced the MSCI Asia Pacific gauge more than nine times over in February.

Even though the economic impact of the virus will surely be brutal in China, helping sentiment is a long list of support measures unleashed by authorities since mainland markets shut in late January for the holiday. China has in the past weeks cut short and medium term policy rates, pumped billions into the financial system and lowered corporate taxes. Beijing has hinted there is room to do more on the fiscal and monetary front.

“The market’s performance far exceeded expectations after the Lunar New Year,” said Ma Cheng, chairman at Shenzhen Juze Investment Management Co. “Investors are encouraged by the easing policies and rising momentum in the stock market, which led more and more investors to pile in.”

While the CSI 300 pared its earlier gain on Friday, it still gained 4.1% this week, its best performance since June. The Shanghai equity benchmark is set for its biggest weekly outperformance versus MSCI’s global gauge in almost a year. The Korean won and Japanese yen have weakened more than 1.3% against the yuan. The yield on China’s one-year government bonds fell to its lowest level since July 2015 earlier this week.

Investors in China appear relaxed about risk again, shaking off concern over the extent to which the virus will hurt economic growth and corporate profits. In the latest set of bleak data, China car sales plunged 92% during the first two weeks of February as would-be buyers stayed home.

©2020 Bloomberg L.P.