Chinese Stock Market Sector Indices Performance in the Time of Novel Coronavirus Pandemic

Abstract

This paper aims to quantify the effect of the deadly novel coronavirus (COVID-19) pandemic outbreak on Chinese stock market performance. Shanghai Stock Exchange Composite Index and its component sector indices are examined in this study. The pandemic is represented by a lockdown dummy, new COVID-19 cases and a dummy for 3 February 2020. First, descriptive analysis is performed on these indices to compare their performances before and during the lockdown period. Next, regression analysis with Exponential Generalized Autoregressive Conditional Heteroscedasticity specification is estimated to quantify the pandemic effect on the Chinese stock market. This paper finds that health care, information technology and telecommunication services sectors were relatively more pandemic-resistant, while other sectors were more severely hurt by the pandemic outbreak. The extent to which each sector was affected by pandemic and sentiments in other financial and commodity markets were reported in details in this paper. The findings of this paper are resourceful for investors to avoid huge loss amid pandemic outburst and the China Securities Regulatory Commission in handling future pandemic occurrence to cool down excessive market sentiments.

Pre- and post-COVID-19: The impact of the pandemic and stock market psychology on the growth and sustainability of consumer goods industries

“…In March 2020, the International Monetary Fund projected that “C'ina's slowdown in the first quarter of 2020 will be substantial and will leave a deep mark for the year” as the Chinese economy sunk to an all-time low in the first 2 months of the year (Hoehl et al, 2020 ). In reality, the Chinese economy dropped 6.8% in the first quarter of 2020 compared to the previous year (Liew and Puah, 2020 ). From the perspective of the stock exchange and indicator of economic growth, the news of the COVID-19 outbreak led Chinese stock markets to fall significantly (Analytica, 2020 ).…”

Impact of government interventions on the stock market during COVID-19: a case study in Indonesia

“…Within a few days after the release, most industries showed overreaction, suggesting a delay in absorbing unusual news. Liew and Puah (2020) also verified that various industries experienced varied levels of lockdown based on their market conditions and business nature.…”

Asian perspective of capital market performance amid the COVID 19 pandemic

“…Al-Awadhi et al. (2020) and Liew and Puah (2020) also found evidence of a considerable negative effect on the share price of all companies listed on the Shanghai Stock Exchange and the Hang-Seng stock exchange composite index. The IT and pharmaceutical sectors, according to the data, performed better than others throughout the epidemic.…”

“…Yilmazkuday (2022) adds to the findings of Baker et al (2020) by demonstrating that a 1% increase in median daily COVID 19 infections in the USA appears to contribute approximately 0:01% of the average fall in the S&P 500 indices on the first day and after one month, the reduction was around 0:03%. Al-Awadhi et al (2020) and Liew and Puah (2020) also found evidence of a considerable negative effect on the share price of all companies listed on the Shanghai Stock Exchange and the Hang-Seng stock exchange composite index. The IT and pharmaceutical sectors, according to the data, performed better than others throughout the epidemic.…”