Photo: Xinhua

The US' frenzied interest rate cut and $700 billion quantitative easing package could intensify market anxiety and send the US stock markets into turmoil, but Chinese markets will remain relatively stable, a Chinese financial expert said on Monday. 

Both the Shanghai and Shenzhen markets closed in the negative territory. The flagship Shanghai Composite Index plunged 3.4 percent, the Shenzhen Component Index lost 5.34 percent and the tech-heavy ChiNext index plummeted 5.9 percent.

The mainland stock markets edged down after the US Federal Reserve took emergency action on Sunday and cut its benchmark interest rate by a full percentage point to nearly zero. It was the second time the Fed slashed interest rates this month. 

The interest rate cut would help pump capital into global markets under normal circumstances, but will likely backfire this time around as market nerves are highly sensitive to government signals about economic status, experts said. 

"By utilizing stronger monetary stimulus than during the 2008 financial crisis, the Fed has pushed the panic button, proving market conjecture that the US economy is in danger," Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times. 

He added that the hefty stimulus package might lead US stock markets to dive again this week, while also adding pressure on overseas markets including the A-share and European markets. 

US stock futures tumbled on Monday and wiped out most of the gains from Friday's rally. Contracts on the S&P 500 have slumped 4.78 percent as of press time. 

"However, with the coronavirus waning and confidence resuming in mainland markets, I predict the A-share markets will stand up to such pressure and continue to act as a beacon for European markets," Dong said. 

Experts also noted that the US rate cut would push up the yuan's exchange rate. The yuan's central parity exchange rate against the US dollar edged up by 15 basis points to 7.0018 on Monday, data from the central bank showed. 

Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, also noted that the US rate cut has increased China's policy room for similar rate cuts, and prompted capital to flow into Chinese markets.