China has confirmed that 17,205 people have been infected by the coronavirus that first broke out in Wuhan, with 21,558 suspected cases, as of midnight on Sunday. The total death toll rose to 361, according to the National Health Commission. Of the two Special Administrative Regions (SARs), Hong Kong has recorded 15 confirmed cases and Macau eight.
The first known fatality outside of China was reported in the Philippines on Saturday. According to the National Immigration Administration, more than 70 countries, including the Philippines, have taken measures to limit travel from Chinese nationals – with some also targeting foreigners with exposure to mainland China in the past 14 days.
“Quantifying the economic impact of the outbreak is extremely challenging at this stage,” said UBS in a Monday note, expecting the hit on GDP growth in the first quarter of 2020 to be roughly 210bp. “Assuming that the outbreak will be controlled in Q1 with few new cases thereafter, we estimate that Q1 GDP growth will drop to 3.8% [year-on-year], while subsequent normalization of activities, release of pent-up demand and policy support should see growth rebounding in Q2-Q4.
“With this assumption, we downgrade China's 2020 GDP growth forecast to 5.4% [from 6%].”
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The International Monetary Fund (IMF) is cautious on its assessment on the potential economic impact from the outbreak of coronavirus, according to Reuters.
Gary Rice, IMF’s spokesman, reportedly said at a regular news briefing last Thursday that while the outbreak was having an indirect impact on market confidence and business uncertainty, hurting equity and bond markets elsewhere with the China markets still closed until Monday, “how large the impact will be exactly is hard to tell at this point”.
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The financial secretary of Hong Kong, Paul Chan, reckons there is a greater risk of Hong Kong plunging further into recession in 2020 due to the outbreak of the coronavirus. The catering, retail and tourism industries will “fall into a deeper winter”, Chan said in a Sunday blog, expecting a drop in government revenue and a rise in expenditure as well as a higher deficit.
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Banks including HSBC and Bank of China (Hong Kong) have decided to shut down or adjust the working hours of some of their branches in the city to counter the spread of the coronavirus.
The Hong Kong Monetary Authority expects around 20% to 30% of bank branches to be temporarily closed, it said last Friday.
These could include 49 branches from BOC and 20 from Bank of East Asia, a total of 24 premier and business centres of HSBC, and 18 branches plus 10 MTR outlets of Hang Seng Bank, according to the South China Morning Post.
Some of the remaining branches operate on restricted hours, the HKMA added, advising customers to instead use online or phone banking, ATMs and other electronic banking services.
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Thousands of medical staff in Hong Kong began a five-day strike on Monday, in a bid to pressure the SAR government to announce a full closure of its border with the Mainland.
The Hospital Authority Employees Alliance, a union with 18,000 members formed only in December during the city’s anti-government protests, said on Sunday on its official Facebook page that 3,123 of the 3,156 votes casted were in favour of the strike. It said around 3,000 medical staff will go on strike on Monday, affecting only non-emergency services, while the Tuesday to Friday period will see 9,000 on strike including those providing emergency services.
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China has announced a series of measures to support the financial markets. The People’s Bank of China (PBoC) conducted a total Rmb1.2tr of reverse repo transactions on Monday.
The agreements included Rmb900bn of seven day reverse repo at an interest rate of 2.40% and Rmb300bn of 14 day reverse repo at 2.55%. The central bank lowered both the seven day and 14 day reverse repo rates by 10bp from 2.5% and 2.65% respectively, which was seen as a rare move by analysts.
Additionally, the central bank will provide Rmb300bn of liquidity to national-level banks and local banks in Hubei province. The hope is that these banks can then provide low-cost special purpose loans to borrowers that are being affected by the ongoing epidemic, Pan Gongsheng, vice governor of the central bank, said on Saturday.
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The Chinese Ministry of Finance (MoF) issued a notice on Saturday encouraging financial institutions to extend loans to onshore small and medium enterprises (SMEs) that have been impacted by the ongoing coronavirus crisis. The MoF also urged financial institutions to eliminate counter-guarantee requirements and lower the guarantee costs for debtors.
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The China Securities Regulatory Commission (CSRC) and the China Banking and Insurance Regulatory Commission (CBIRC) both issued notices on regulatory arrangements during the virus outbreak.
According to the securities watchdog, there are 212 company bonds with a total value of Rmb231.7bn maturing in March. However, considering that the coronavirus may have caused challenges to some companies to repay their bonds, the CSRC will set up “green channels” to support these firms to replace old maturing bonds with new ones.
Secondly, the CSRC and the two stock exchanges encouraged securities houses and other financial service providers to closely monitor onshore default risks and communicate that in a timely manner to investors. Service providers have also been told to facilitate talks between investors and issuers regarding the repayment arrangement of bonds during the epidemic.
The banking and insurance regulator also encouraged banks and insurance companies to boost funding supply to regions that are affected by the coronavirus, according to a January 26 statement.
The retail, hospitality, transportation, logistics and tourism industries have been heavily affected by the virus. Banks should not cut funding supply for companies in those industries, the CBIRC said.
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The Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) published detailed arrangements for upcoming IPOs and information disclosures as the country tries to curb the spread of the virus.
For example, candidates applying to list on the Star Market will see their deadlines for responding to inquiries from the SSE postponed until further notice.
The stock exchanges also encouraged issuers and sponsors to hold online roadshows instead of in-person meetings. The SSE has decided to eliminate the annual fees in 2020 for all listed companies registered in Hubei, the province at the centre of the epidemic.
Further, listed companies experiencing difficulties meeting deadlines for publishing their 2019 annual financial statements can apply to postpone the disclosure date to April 30. For companies that cannot meet the April 30 deadline, they should inform the exchanges. However, more detailed arrangements will only be made after the exchanges consult with the CSRC.
Additionally, the Hong Kong Stock Exchange and the Securities and Futures Commission in Hong Kong will allow listed companies to apply to postpone publishing earnings reports, local media reported, citing sources.
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China’s January manufacturing Purchasing Managers’ Index (PMI) moderated slightly to 50.0% from 50.2% in December, according to data from the National Bureau of Statistics. Non-manufacturing PMI rose to 54.1% from 53.5% in December.
The production sub-index declined by 1.9 percentage point from 53.2% in December to 51.3% in January. The new export orders sub-index also declined from 50.3% in December to 48.7% in January. Meanwhile, new order sub-index rose to 51.4% from 51.2%.
“Because the survey was done before January 20, the outbreak of coronavirus was not yet reflected in January's NBS PMI,” Maggie Wei, an economist at Goldman Sachs, noted in a Friday report.
“We expect a big plunge for both manufacturing and services PMI in February to a range of 40-45 due to the coronavirus outbreak,” Ting Lu, chief China economist at Nomura, wrote in a Friday note. “The services PMI could be hit harder than the manufacturing PMI, as a number of service sectors have come to a grinding halt since January 23.”