Having been shut from 23 January to combat the continuing spread of coronavirus, China’s stock market reopened on 3 February and the benchmark Shanghai Composite Index promptly fell by almost 8% in a single day.
- The outlook remains hugely uncertain
- Brazil cut interest rates to 4.25%
- India’s economy continued to slow
To view the series of market updates through February, click here
Having been shut from 23 January to combat the continuing spread of coronavirus, China’s stock market reopened on 3 February and the benchmark Shanghai Composite Index promptly fell by almost 8% in a single day. As the month went on, share price performance proved choppy; nevertheless, prices rallied as the number of newly diagnosed cases outside China outstripped those within China. Over February as a whole, the Shanghai Composite Index fell by 3.2%.
“Large-scale stimulus measures have the potential to jeopardise other key policy goals”
The People’s Bank of China (PBoC) injected 1.2 trillion yuan into the financial system in order to ensure sufficient liquidity; China’s central bank also cut its lending rate to financial institutions from 3.25% to 3.15%, and went on to reduce its one-year prime lending rate from 4.15% to 4.05% and its five-year prime lending rate from 4.80% to 4.75%. Elsewhere, over 300 Chinese companies applied for bank loans to offset the financial impact of the coronavirus.
China’s authorities announced their decision to postpone its annual National People’s Congress (NPC) because of the outbreak. This is a key meeting in which the country’s aims – including its economic targets – are set out. Credit ratings agency Fitch believes that “huge uncertainties” remain over the potential impact of the virus, but warned that large-scale stimulus measures have the potential to jeopardise other key policy goals such as the reduction of risks in the financial sector.
Policymakers at Brazil’s central bank cut its key Selic interest rate by 0.25 percentage points to 4.25% during February. The Monetary Policy Committee (Copom) said that it did not expect to implement any further reductions in the short term, and its next steps will depend on the evolution of economic activity, the balance of risks, and the outlook for inflation. The Bovespa Index fell by 8.4% over February.
India’s economic growth continued to slow during the final three months of 2019, posting growth of 4.7%, compared with the previous quarter’s growth of 5.1%. Looking ahead, coronavirus is expected to put a brake on growth during the first three months of 2020 against a backdrop of disrupted supply chains and lower demand from key markets such as China. Investor sentiment in India was also marred by unrest during protests over the government’s controversial citizenship laws. Over February, the CNX Nifty Index fell by 6.4%.
A version of this and other market briefings are available to use in our newsletter builder feature. Click here