Investors erased $393 billion from China's benchmark stock index on Monday, sold the yuan and dumped commodities as fears about the spreading coronavirus and its economic impact drove selling on the first day of trade in China since the Lunar New Year.

A nearly eight percent plunge on the Shanghai Composite index was its biggest daily fall in more than four years. The Chinese yuan blew past the seven-per-dollar mark, Shanghai-traded commodities from palm oil to copper hit their maximum down limits.

Wipeout despite the central bank's cash injection

The wipeout came even as the central bank made its biggest cash injection to the financial system since 2004 and despite apparent regulatory moves to curb selling. The total number of deaths in China from the coronavirus rose to 361 as of Sunday. It had stood at 17 when Chinese markets last traded on January 23.

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"You wanted to know what a real decoupling from China might look like, or what a 'what if everyone just stayed at home and didn't buy anything?' economic thought-experiment looks like? Well here you are, folks," Rabobank strategist Michael Every said in an afternoon note.

Multiple commodities show a sharp drop

The yuan began onshore trade at its weakest this year and was down 1.2 percent by the afternoon, sliding past the symbolic 7-per-dollar level CNY= to 7.0155. Shanghai-traded oil, iron ore, copper and soft commodities contracts all posted sharp drops, catching up with sliding global prices. The new virus has created alarm because it is spreading quickly, much about it is unknown, and authorities' drastic response is likely to drag on economic growth.

"This will last for some time," said Iris Pang, Greater China economist at ING. "It's uncertain whether factory workers, or how many of them, will return to their factories," she said. "We haven't yet seen corporate earnings since the (spread of the) coronavirus. Restaurants and retailers may have very little sales."

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Over 2,500 stocks fall

More than 2,500 stocks fell by the daily limit of 10 percent. The Shanghai Composite closed down 7.7 percent at 2,746.6, its lowest since August and a modest recovery from being down nearly 9 percent in early trade. Copper SCFcv1 sank to its lowest in more than three years, falling by its daily limit of 7 percent, while aluminum SAFcv1, zinc SZNcv1 and lead SPBcv1 shed more than 4 percent and soybeans DSAcv1 dropped 2 percent. Bond prices, meanwhile, surged, with March futures contracts for 10-year bonds jumping 1.4 percent CFTH0.

The People's Bank of China (PBOC) said the stock's plunge had irrational or even panic elements, triggered by herd behavior, in a newspaper commentary published after markets closed. The sell-off cast a pall over the mood in Asia, though losses were contained because a slide had been expected. Hong Kong's Hang Seng.HSI, which shed almost 10 percent in two weeks, was steady.

Clear message

Amid the selldown, the PBOC had injected 1.2 trillion yuan ($173.81 billion) into money markets through reverse bond repurchase agreements, the largest such move since 2004 according to DBS analysts.

It also unexpectedly cut the interest rate on those short-term funding facilities by 10 basis points. The chance of a benchmark lending rate cut on February 20, the date of its next monthly fixing, has significantly increased, central bank adviser Ma Jun said. China's securities regulator moved to limit short selling and urged mutual fund managers not to sell shares unless they face investor redemptions, sources told Reuters.

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"It is a clear message that they want to take growth-supportive measures and keep the market reassured," said Mayank Mishra, macro strategist at Standard Chartered Bank in Singapore, of the PBOC move. "They are managing the situation well. The timing of the repo rate cut came a little quicker than some people were expecting, but they wanted to send a clear message." Beijing has also said it would help firms that produce vital goods resume work as soon as possible, state broadcaster CCTV reported.

Cities remain under lockdown

Cities like Wuhan, where the virus originated, remain in virtual lockdown and China is facing mounting international isolation. Analysts are beginning to suspect the impact will be deeper than the hit delivered by the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003. That pounded growth across Asia, especially in Hong Kong, and sent the Hang Seng index down by 18 percent over four months.

Though it quickly rebounded then, China's share of the global economy has grown fourfold since then and, with so many unknowns, few are willing to call a bottom just yet. "At this point, we don't see this as a buying opportunity," said Invesco's David Chao, global market strategist, Asia ex-Japan. "We are in the midst of the escalation period."