Traders in Shanghai are preparing to return to work next week, even though the worsening coronavirus outbreak could leave mainland China’s financial hub severely depleted.
Local brokerages and asset managers said they expected to field reduced teams on Monday morning, when equity and bond markets in the world’s second-biggest economy resume trading after an extended lunar new year break. That is despite orders from the Shanghai government that most businesses stay shut until February 9.
The temporary closure of business activity in the city of over 20m people comes as concerns mount over the coronavirus epidemic, which has killed more than 130 people and infected thousands, mostly in the central province of Hubei.
Zhang Pan, director of research at Shanghai-based Raman Capital, which manages over $430m in bonds, said six of its 27 employees will report to work. However, they will trade wearing face masks and with no air conditioning, in a bid to counter the spread of the virus. “Bond trading resumes on Monday and we need to make the market function,” Mr Zhang said.
Staff at other Shanghai-based companies expressed surprise that the central bank has allowed trading, clearing and settlement to resume. “I was a bit surprised when they said ‘open on Monday’, but I guess they want to come back to normality,” said one director at a Shanghai brokerage.
“You cannot do this type of job entirely from home, you need some people at the office,” he added, noting that his company has told those with symptoms of the virus to stay at home.
Companies that disobey the shutdown could face repercussions. Shanghai-based lawyer Dong Fei wrote on the official WeChat account of the city’s bar association that businesses defying the order could be fined up to Rmb120,000 ($17,300) or have their licences removed.
But Shanghai-based brokers pointed out loopholes in the official orders. Exceptions are made for “companies important to the national economy and peoples’ livelihoods” — without specifying what those are.
Unease among market participants is not limited to Shanghai. Shen Xiao, a high-yield bond fund manager at Zhongji Investments in Beijing, said he was not sure whether he will be in the office next week. “I need to have access to computers in the office if I want to borrow funds to make trades,” Mr Shen said. “I haven’t made a decision because of the disease.”
Shenzhen, which is home to mainland China’s second stock market, has said its bourse will also resume trading on Monday, after the central bank pushed back the reopening originally scheduled for Friday.
But the local government has not imposed restrictions on companies operating in the city, even after the provincial government for Guangdong ordered businesses not to return to work until February 10. Hong Kong, with which Shenzhen shares a border, has paused rail services with the mainland and suspended permits for Chinese tourists visiting the territory.
Traders may have a tough task when the opening bell rings on Monday. Shares in Chinese companies listed in Hong Kong and New York have been battered in recent days by concerns over the spread of the virus and the pressure it will put on China’s already slowing growth.
When Hong Kong’s stock market resumed trading on Thursday, the benchmark Hang Seng index dropped almost 3 per cent, its biggest daily drop since August. The Hang Seng China Enterprises index — which contains big mainland Chinese companies listed in the territory — finished the day down 3.3 per cent.
Financial and industrial stocks tracked by the China-focused index were among those hardest hit by the sell-off, falling 3.6 per cent and 4.8 per cent, respectively. These two market segments alone account for nearly half the weighting by market capitalisation of Shanghai’s benchmark composite index.
Analysts said they expected a sharp sell-off in mainland Chinese stocks on Monday when trading resumes, with foreign investors using Hong Kong’s stock connect programme among market participants most likely to offload shares.
Authorities are also aware of pent-up selling pressure among the country’s retail investors, who have watched share prices elsewhere in the region drop in response to the outbreak. This week, China’s securities regulator pre-emptively instructed traders to “actively guide investors to rationally, objectively analyse the impact of the outbreak” and “adhere to the concepts of long-term and value investment”.
“The main concern is what sentiment in the market will be on Monday,” said the brokerage director in Shanghai. “I don’t think there’s going to be any kind of operational constraint there.”
Additional reporting by Christian Shepherd in Beijing