China to inject $174 billion of liquidity on Monday as markets reopen

By Cheng Leng and Brenda Goh

SHANGHAI (Reuters) - China's central bank said it will inject 1.2 trillion yuan ($174 billion) worth of liquidity into the markets via reverse repo operations on Monday as its stock markets prepare to reopen amid an outbreak of a new coronavirus.

Chinese authorities have pledged to use various monetary policy tools to ensure liquidity remains reasonably ample and to support firms affected by the virus epidemic, which has so far claimed 305 lives, all but one in China.

The People's Bank of China made the announcement in a statement on Sunday, adding the total liquidity in the banking system will be 900 billion yuan higher than the same period in 2019 after the injection.

According to Reuters calculations based on official central bank data, 1.05 trillion yuan worth of reverse repos are set to mature on Monday, meaning that 150 billion yuan in net cash will be injected.

Investors are bracing for a volatile session in Chinese markets when onshore trades resume on Monday after a break for the Lunar New Year which was extended by the government.

China's stock, currency and bond markets have all been closed since Jan. 23 and had been due to re-open last Friday.

There will be no further delays to the reopening, the securities market regulator said in an interview in the People's Daily newspaper on Sunday.

The China Securities Regulatory Commission (CSRC) said it had taken the decision after balancing various factors, and believed the outbreak's impact on the market would be short term.

To support firms affected by the epidemic, the CSRC said companies that had expiring stock pledge agreements could apply for extensions with securities firms, and it would urge corporate bond investors to extend the maturity dates of debt.

The CSRC is also considering launching hedging tools for the A-share market to help alleviate market panic and will suspend evening sessions of futures trading starting from Monday, it said.

"We believe that the successive introduction and implementation of policy measures will play a better role in improving market expectations and preventing irrational behavior," it told the People's Daily.

China is facing mounting isolation as other countries introduce travel curbs, airlines suspend flights and governments evacuate their citizens, risking worsening a slowdown in the world's second-largest economy.

State news agency Xinhua said on Sunday that China's economy was resilient enough to counter the shock caused by the virus, and said remarks made by a U.S. federal official - whom it did not name - that the virus could bring jobs back to the United States were "self-centered, unprofessional and unethical".

U.S. Secretary of Commerce Wilbur Ross said last week that the virus could force companies to re-evaluate their supply chains, potentially returning some jobs to the United States.

"The remarks only served to taint the U.S. image as a major global player," Xinhua said in the commentary.

"An outbreak of a disease like this could not be the basis for multinational companies to make serious and long-term investment decisions in China...If the Chinese economy slows drastically, the U.S. economy will also suffer."

(Additional reporting by Samuel Shen and Winni Zhou in Shanghai; Editing by Lincoln Feast and Angus MacSwan)