Demand panic spooks markets amid a collapse in China’s commodity prices

Demand panic spooks markets amid a collapse in China’s commodity prices

  • Chinese investors on Monday returned to a market gripped by fear on the first trading day after the Lunar New Year break.
  • China’s three leading exchanges were hit with massive selling as the local and international investors had the first chance of cutting their losses inflicted by overseas activities during the holiday period.
  • Companies have also been advised to delay resuming operations until at least February 10th

Chinese investors on Monday returned to a market gripped by fear on the first trading day after the Lunar New Year break. The Coronavirus death toll has risen to at least 361 in China alone as of this morning, Aljazeera confirmed.

China, the world’s biggest consumer of raw materials is the most hit, after the virus emanated from one of its industrial cities, Wuhan.

As China’s markets reopened today at 9 am local time, the country’s three leading exchanges were hit with massive selling as the local and international investors had the first chance of cutting their losses inflicted by overseas activities during the holiday period.

Palm oil and crude dipped to maximum allowed levels while iron ore fell by its daily 8% limit.

Global investors have been dumping raw materials following disruption of demand by the Coronavirus panic, which has to date invaded more than 20 countries. Copper was majorly hit in London while Kuala Lumper dumped palm oil over fears of economic fallout.

Dozens of provinces in China have extended the holiday period by at least a week to avert an escalation of the virus that has killed hundreds and left thousands infected. Companies have also been advised to delay resuming operations until at least February 10th: regions accounting for 60% of steel production, 90% of copper smelting, 65% of oil refining, and 40% of coal output are among some of the affected.

Fears over how that decision will impact commodities have been pounding the markets even as most businesses in China remain closed.

Since the beginning of the year, Brent crude has tumbled about 10%, Malaysian palm oil around 11%, American soybean about 4%, and London Meta Exchange dropped by close to 7%.

Singapore ore contracts also dropped by 11%.

China has, however, come out strongly to say it will protect its market and injected more than $21 billion in a bid to avoid massive sell-offs following the virus outbreak.

The US said it is ready to redirect Chinese flights carrying passengers from Coronavirus-stricken regions.

Airlines from other parts of the world, including Europe, Asia, and the Middle East have also stopped flying to China mainland.

US President Donald J. Trump said his government has offered to help China, but measures have been put in place to prevent the virus from spreading into America.

“We pretty much shut it down coming in from China. We’ve offered China help, but we can’t have thousands of people coming in who may have this problem, the coronavirus. So we’re gonna see what happens, but we did shut it down, yes,” Mr Trump said on Fox TV’s Super Bowl pregame broadcast.

By Damian Wood
As an experienced trader, I work for myself managing my own small portfolio and also contributing on several investment news sites. I mix my passion for the industry and journalism to bring my readers informative and trustworthy articles.

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