HONG KONG (Nikkei Markets) -- Asian shares outside of Japan extended losses on Monday as growing fears over the coronavirus outbreak prompted mainland Chinese equities and the yuan to plunge when markets opened after the Lunar New Year break.
The Nikkei Asia300 index of companies outside Japan fell 0.95% to 1,308.58, adding to last week's 5.4% fall.
The Shanghai Composite tumbled 7.7% on Monday, its worst drop since 2015, while the onshore yuan fell 1.2% to 7.0188 against the dollar to record its biggest daily loss since August.
Mainland Chinese markets were reacting to the heightened worries over the impact of the epidemic since they previously traded on January 23 before markets closed for the holidays. The virus has claimed more than 350 lives, infected more than 17,000 people in China, and spread to several countries. The Over the weekend, the Philippines reported the first fatality outside of China due to the virus.
Economists at Capital Economics and Goldman Sachs last week cut their forecast for China's GDP this quarter amid a shutdown of businesses and plants to contain the spread of the virus.
Capital Economics said its tentative estimate is that China's economic growth this quarter is likely to fall to roughly 3% year-on-year from a forecast of 5.7% in December quarter. Goldman Sachs said the virus outbreak is likely to lower the annual-average 2020 GDP growth of China by 0.4%.
To lessen the impact of the virus on the economy, People's Bank of China on Monday cut the 7-day reverse repo and 14-day reverse repo rate by 10 basis points. Over the weekend, the bank said it will inject 1.2 trillion yuan ($174 billion) worth of liquidity into the markets via reverse repo operations on Monday, Reuters reported.
"Further loosening seems likely in the coming weeks unless there is a rapid improvement in the coronavirus situation," Capital Economics said. "We were already on the dovish side of consensus prior to the outbreak, with a forecast for 50 basis points of PBOC rate cuts this year. We wouldn't be surprised if the PBOC now lowers rates even more aggressively."
Meanwhile, in data released on Monday, the China Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) fell to 51.1 in January from 51.5 in the previous month.
In major losers on the A300 on Monday, heavyweight Taiwan Semiconductor Manufacturing dropped 1.6%.
PetroChina led energy-related shares lower, falling 2% after Brent crude on Friday dropped to four-month lows.
Shares of metal and mining companies extended losses amid challenging China economic outlook. South Korea's Posco fell 2.9%, Hyundai Steel lost 3%, and India's Hindalco Industries declined 3.9%.
LG Chem closed 3.7% higher after falling by as much as 3.6% earlier in the session. The South Korean firm said Monday it swung to a loss in the fourth quarter from a year earlier.
Indian conglomerate ITC dropped 5.1%, adding to Saturday's 7% fall after the country's finance minister proposed raising taxes on cigarettes. India presented the budget for fiscal year beginning April 1 on Saturday.
--Nimesh Vora
