Chinese Central Bank to Pump Billions Into Markets Amid Coronavirus Fears
- Chinese Central Bank will inject US$174 billion into markets, as they prepare to reopen tomorrow after an extended break due to the virus outbreak
- The injection will be 900 billion yuan higher than the one from the same period last year
- The China Securities Regulatory Commission believes the virus’ impact on the market is short-term
The People’s Bank of China (PBoC) will pump 1.2 trillion yuan (US$174 billion) into financial markets on February 3, in an attempt by regulators to reduce volatility when the markets reopen after an extended break due to the coronavirus outbreak.
The government has pledged to increase the liquidity by using monetary policy tools and to provide support to the companies harmed by the epidemic, which has killed 305 people so far, all but one in China.
The PBoC issued a statement saying the total liquidity in the banking sector will be 900 billion yuan higher compared to the same period last year.
“The liquidity of the overall banking system will be 900 billion yuan more than the same period of last year,” the bank said.
This is the largest reverse repurchase transaction the bank has ever performed, and the first time it has issued such a statement.
Chinese authorities have extended the Lunar New Year break due to the virus outbreak, and traders are getting ready for a volatile trading day when the markets reopen on Monday.
All of the markets have been closed since January 23rd and were supposed to reopen last Friday.
A securities market regulator said that the markets will open tomorrow, and there will be no more delays.
The China Securities Regulatory Commission (CSRC) said it chose to reopen markets tomorrow after evaluating several factors, adding the virus’ impact on the market will not be long-term.
The regulators are also exploring the idea of rolling out hedging tools for the domestic shares market as part of an effort to reduce market panic, and halt evening sessions of futures trading starting tomorrow.
“We believe that the successive introduction and implementation of policy measures will play a better role in improving market expectations and preventing irrational behaviour,” CSRC said in an interview with the People’s Daily.
The Beijing-based press agency Xinhua said today that China’s economy has endured the blow caused by the epidemic, adding that comments made by a U.S. federal official that the virus could return some jobs back to the United States were “self-centred, unprofessional and unethical”.
