UK stocks avoid the big sell-off experienced by Chinese shares

“Chinese stocks played catch-up on Monday as its markets reopened after more than a week’s closure. The Shanghai Composite index fell nearly 8% as investors finally had a chance to react to the coronavirus spreading,” says Russ Mould, Investment Director at AJ Bell.

“While the scale of this movement is enormous in terms of daily stock market action, it essentially puts China’s market more in line with how the Hong Kong index has reacted in the past few weeks.

“Running the numbers from when Hong Kong’s Hang Seng index market peaked on 17 January, the former index has since fallen by 9.3% versus a 10.7% drop from China’s Shanghai Composite index.

“In terms of the sectors suffering as Shanghai’s market reopened, worst hit were telecommunications (-9.9%), industrials (-9.5%), tech (-9.4%) and consumer cyclicals (-9.3%). The best performers were mostly healthcare stocks including Harbin Pharmaceutical and Tianjin Tianyao Pharmaceuticals which both increased by 10.1% in value.

“Efforts by officials to calm markets by injecting additional liquidity didn’t stop investors in Chinese stocks from panicking. Commodity markets were also weak with oil prices falling by another 1% to $56 a barrel.

“Ultimately the coronavirus has been very damaging for anyone with money invested in the markets via their pension or investment accounts. However, markets outside of Asia on Monday showed signs of stabilisation.

“The FTSE 100 was flat at 7,285, somewhat helped by the pound weakening against the dollar, down 0.6% to $1.3130. That’s generally good for companies whose shares are priced in pounds but who earn in foreign currencies including the dollar.

“However, this didn’t apply to the wealth of natural resources companies which saw small declines at the start of the new week amid commodity price weakness including Royal Dutch Shell, down 0.7%, and Glencore which dropped 0.5%.

“European markets held their ground or nudged slightly ahead such as the DAX in Germany which advanced by 0.1%.

“The lack of big declines on the UK and European markets would suggest investors are taking time to weigh up the potential impact of the health incident on the global economy and whether all the really bad news is now priced in.”

These articles are for information purposes only and are not a personal recommendation or advice.