China stocks nosedive 9%, drag rest of Asia lower

China’s return from the Lunar New Year holidays dragged the Asian equities as MSCI’s index of Asia Pacific shares outside Japan declined 1.2% during early Monday. It’s worth mentioning that stocks in SHANGHAI retrace around 9% losses to 8.13% by the press time while that of Japan loses -1.12% while heading into the European open.

Chinese traders got a disappointing welcome with downbeat Caixin Manufacturing PMI and Industrial Profits. The same helped the bears to ignore government measures to infuse liquidity via reverse repo cuts as well as disobey orders to tame short-selling.

Previously, fears of coronavirus outbreak weighed on the market’s risk-tone. The deadly virus has already claimed more than 350 lives while affecting 14,500+ across the globe. As identifying the seriousness of the concern, global airlines have stopped flights to and from China. It should also be noted that another such virus outbreak, the H5N1 bird flu, has been spotted during the weekend from the Shuangqing district of Shaoyang city, China.

Elsewhere, Australia’s mixed data failed to deny more than 1.0% loss to the ASX 200 whereas NZX 50 also followed the suit. Further, India’s BSE SENSEX also opens on the back foot around 39,700 as broad risk-off supersedes the government’s union budget that tried to keep the equity bulls happy.

While the initial reaction to China’s return has been negative, traders may look for clues to recover losses as the government is trying to tame the contagion. In doing so, investors could follow updates from the economic calendar, mainly from the US, China and Japan.