Stock markets in China have seen the biggest daily fall in five years as traders rushed to sell amid continued fears about the impact on the global economy of the coronavirus epidemic, the Guardian reports. The benchmark Shanghai composite index fell 8.7% at the opening on February 3 following the 10-day closure for the Chinese New Year holiday. The Shenzhen composite was off 9.1% and dangerously close to the daily maximum permitted fall of 10% after which trading is suspended. The yuan fell to below seven-to-the-U.S.-dollar for the first time since December.

Bloomberg said it was the worst fall on the Chinese markets since 2015. There was also heavy selling across the rest of Asia Pacific, with the Australian benchmark S&P/ASX200 index leading the way downwards with a fall of 1.64%. The Nikkei in Tokyo was also down 1% in early trading and the Seoul market was off 1.5%. Hardest hit in Australia was the energy sector, with the index down 3.77% after 15 minutes of trade as the oil price continued to suffer from the prospect of a prolonged slowdown in the Chinese economy. Safe havens of gold and government bonds continued to benefit as investors shied away from risk.

In a sign that the worse might possibly be over, the Hang Seng Index, which posted heavy losses during the Spring Festival holiday while its mainland counterparts were closed, swung back into positive territory at market close on February 3. Following the plunge of the Chinese A-share markets, global markets recovered the next day. Despite more cases of the coronavirus being confirmed, stock markets stabilized on hopes that there would be a repeat of what happened during the SARS outbreak in 2002-03, when share prices quickly regained all their lost ground once the virus had been contained. Despite the market plunge, a net total of nearly CNY18.2 billion in foreign capital flowed into the A-share market via stock connects between the mainland and Hong Kong bourses, the second-highest amount in history, pointing to global investors’ confidence in the long-term prospects of the Chinese economy.

China has announced measures to ensure ample liquidity and reduced lending rates to companies affected by the outbreak. Banks and financial institutions are encouraged to increase lending to support the real economy. Beijing also announced that it would waive tariffs – for the period of January 1 to March 31 – on all imports of goods and equipment needed to help fight the coronavirus. Imports of donated goods, including ambulances and vehicles used to spray disinfectant, and disinfection products, would also be exempt from import taxes. Foreign retailers and restaurant chains, including Apple Stores, Ikea, McDonald’s and Starbucks, are closing several or all of their outlets in China at least until February 9.