“Fear and panic are rampant”, one fund manager told Bloomberg on Thursday, describing what, by the close, was the worst pre-holiday rout in mainland China shares on record.
90% of stocks fell. Volumes were well above average. Foreign traders dumped $1.7 billion of exposure via the Hong Kong links, a record.
The CSI 300 fell more than 3% on the day. It was the worst session since Donald Trump reignited the trade war on May 6. The gauge is now down 2.3% in 2020.
Although worries about the Wuhan virus appeared to abate on Wednesday, jitters resurfaced Thursday in dramatic fashion as health officials took new steps to curb the spread of the deadly malady which has now killed 17 people.
On the heels of the near shutdown in Wuhan, the epicenter of the outbreak, both Huanggang and Ezhou imposed restrictions on travel and public gatherings, local officials said.
The Shanghai Composite’s 2.8% Thursday plunge was the worst last day of a Lunar Year ever, and it brings this year’s underperformance versus the S&P 500 to 5%. In fact, the China-US “equity ratio” appears to have tagged the lowest point since 2005 on Thursday.
There have been just six years since 1991 when the SHCOMP has closed lower on the last session before the long Lunar New Year holiday.
In Hong Kong, the China Enterprises Index plunged again, losing 2%. A mainland gauge of consumer staples has lost more than 6% this week, the worst stretch since October 2018.
Suffice to say that if the outbreak worsens over the holiday, the reopen could be particularly messy on January 31. After Friday, Hong Kong markets will be closed until next Wednesday. Two cases of the virus have been confirmed in the city so far, and there will almost certainty be more.
As one market participant told Bloomberg Thursday, “either you’re going to have last minute moves today and tomorrow to get positions in place and take them off, or when we come back — we’re going to get some decent volatility then”.
Might be a good time for market participants to reacquaint themselves with Taleb’s work.