China's main stock market index slid 8 per cent on Monday, wiping $420 billion off its value, as investors continued to worry about the economic hit from a deadly virus outbreak in China.
As traders in Asia's biggest economy returned from an extended Lunar New Year break, the slide in the benchmark Shanghai Composite index meant emerging market stocks held at near two-month lows.
MSCI's index for emerging market equities fell 0.8 per cent, declining for the eighth straight day as the death toll from the coronavirus outbreak rose to 361 in China.
The index ended January with a near 5 per cent decline as risk appetite took a beating during the first month of 2020, mostly driven by geopolitical risks and concerns about the epidemic in China.
"The real concern now is that China's growth will be heavily impacted by the deadly coronavirus outbreak," Hussein Sayed, chief market strategist at FXTM, wrote in a note.
"With the number of deaths in mainland China overtaking the 2003 Severe Acute Respiratory Syndrome epidemic and the number of cases infected reaching more than 17,000, it is unknown when this epidemic will come to an end."
Emerging market currencies also kicked off the week on softer footing with the onshore yuan leading declines as it shed more than 1 per cent.
MSCI's index for emerging market currencies dropped 0.5 per cent.
In an effort to assuage markets, China's central bank unexpectedly lowered the interest rates on reverse repurchase agreements and injected a total of 1.2 trillion yuan (Dh627.9bn) into money markets on Monday.
Stocks elsewhere in Southeast Asia also witnessed sell-offs on Monday, with shares in Singapore dropping 1.2 per cent to their lowest level since October 18, 2019.
"Sentiment remains very fragile as markets dynamically try to get a sense of when containment will catch up with contagion," Vishnu Varathan, a senior economist at Mizuho Bank, said.
Economic data from China, the region's biggest trading partner, added to the gloom as factory activity slowed in January, while annual industrial profit also fell.
Vietnam stocks, which dropped as much as 4.8 per cent during the day, pared some losses to end 0.9 per cent lower. Vietjet Aviation plunged 7 per cent after Vietnam briefly halted all flights to and from China including Hong Kong, Macau and Taiwan. The Philippines, which reported the first fatality related to the virus outside mainland China, saw its benchmark index fall 0.9 per cent.
Malaysian equities extended losses for a tenth straight session and Indonesian shares fell nearly 1 per cent, weighed down by consumer and communication stocks.
