January 22, 2020 / 7:21 AM / a month ago

China stocks rebound as Beijing calms jitters over virus outbreak

* Shanghai shares, blue-chips bounce back from YTD trough

* China vows to fight virus that kills 9, infects over 400

* Risk heightens as millions set to travel for Lunar New Year

* Yuan, Hong Kong stocks tick up after worst day in 5-months

HONG KONG/SHANGHAI, Jan 22 (Reuters) - The Chinese stock market reversed early losses to end higher on Wednesday, as Beijing vowed to contain the new, spreading virus which has killed nine and infected 440 in the country.

The coronavirus spread from Wuhan in central China to several other cities and abroad, just as millions of people prepared to travel for the Lunar New Year between Jan. 24 and 31.

“If the pneumonia couldn’t be contained in the short term, we expect China’s retail sales, tourism, hotel and catering, travel activities likely to be hit, especially in Q1 and early Q2,” analysts at UBS said in a note on Wednesday.

Shanghai shares closed up 0.3% and the blue-chip CSI300 ended 0.4% higher, lifting the benchmarks from their lowest levels this year hit during morning trade. Treasury futures curbed earlier gains.

The recovery followed a televised news conference by China’s National Health Commission where vice-minister Li Bin said Beijing is tightening containment measures in hospitals and stepping up co-operation with the World Health Organization.

President Xi Jinping has asked officials to make battling the virus a top priority.

The Hong Kong market, which had its worst day in over five months on Tuesday, was up 1.2% as of 0700 GMT.

Linus Yip, chief strategist at First Shanghai Securities in Hong Kong, said investors believe the odds continue to favour Chinese equities as they bet on Beijing and Washington’s trade agreement, signed earlier in January.

“From time to time we will see disruptions to that trend, such as the Middle East tensions this month. But the trend is still in good shape. China’s economy is improving,” he said.

Jefferies’ analysts suggested in a note that markets were under-reacting to the person-to-person spread of the virus and “have been playing catch-up over the last two trading days.”

Calm also returned to the Chinese currency market where traders usually close out large positions ahead of the Lunar New Year holiday, which begins on Friday.

The yuan was flat in the onshore market and 0.1% stronger offshore, hovering near one-and-a-half week lows after clocking its largest daily losses since August on Tuesday.

“Nothing about the fundamentals has really changed. Everything was driven by sentiment,” said a Shanghai-based trader. (Reporting by Noah Sin and Winni Zhou in Shanghai; Writing by Noah Sin; Editing by Jacqueline Wong)

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