STOCKS slumped yesterday, as fears over the economic impact of the global coronavirus epidemic were exacerbated by a crash in oil prices that battered financial markets around the world.

The CSI300 index skidded 3.4 percent to close at 3,997.13 points, while the Shanghai Composite Index slid 3.01 percent, to 2,943.29 points.

Sectors fell across the board, dragged down by materials and consumer firms.

For the day, foreign investors sold A shares worth more than 12 billion yuan (US$1.73 billion) via the Stock Connect linking the mainland and Hong Kong amid a rush to buy less risky assets.

Still, losses were still limited compared to other markets, helped by the number of new virus cases in China falling and expectations of further policy support to underpin the world’s second-largest economy.

“Fears over the global coronavirus contagion persisted, while the oil plunge was also a reflection of worries over global economic momentum,” said Zhou Longgang, an analyst with Huachuang Securities.

“China has more fiscal policy room to hedge the impact from the virus outbreak, which is why the A share market is relatively stronger, as a wave of rate cuts by central banks could have limited impact on global capital markets and economy,” Zhou added.

Analysts also argued a firm yuan and the historically high interest rate spreads between China and the United States could help bolster the attractiveness of Chinese assets.

The continued drop in new cases fuelled optimism that the virus spread has been brought under control in the country.

Meanwhile, dismal economic data reinforced expectations that the government would take more proactive measures to shore up the economy.

“(The) A share market is still very locally driven. Local investors feel they have experienced the worst and the government is going to implement easier fiscal, monetary policy and help the domestic economy to recover,” said Khiem Do, head of China Investments at Barings.

(SD-Agencies)