In the wake of the news of the coronavirus infection, the Chinese leadership went into overdrive and made it a Draghi-like "whatever it takes" moment to prevent panic and stabilize markets. When the stock markets opened after the Lunar New Year break, the authorities prohibited short sales, directed large shareholders not to sell their holdings, and the PBOC turned on their firehose of liquidity to support the stock market. Those steps largely succeeded. China's stock markets stabilized and recovered, and so too the markets of China's Asian trading partners.
However, there were signs that the market is unimpressed by the steps taken by Beijing to control the outbreak and limit its economic impact. Market participants were conducting a guerrilla campaign against the PBOC by using Mao Zedong's principles of war. The first principle is "When the enemy advances, we retreat."
Indeed, when the PBOC flooded the market with liquidity, stock prices went up. But that's not the entire story.
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