Chinese stocks rallied in the earlier portion of the month on the back of the successful Sino-US trade deal negotiation and the subsequent signage in Washington, but as the severity of the COVID-19 epidemic was unveiled, doubt is casted over the Chinese economic outlook.

Disregarding the epidemic, the overall economy continued to stabilise, various PMIs remained above the 50 level, industrial production also remained resilient, PPI also returned positive after six consecutive negative months. That said, industrial profits fell, exporting sectors continued to be exposed to internal and external risks. With the coronavirus outbreak yet to be contained, economic growth in China is likely to further slowdown.

Although the monetary policy enacted in early January should provide support to the markets, market sentiment stays vulnerable in the short to mid-term, and the long term economic prospect remains uncertain.