Hong Kong follows most Asia-Pacific markets lower as IMF warns ‘Great Lockdown’ is the worst downturn since Great Depression
- The Hang Seng Index sheds 1.2 per cent to 24,145.34, with oil stocks weighing on the benchmark
- The IMF expects China’s first-quarter economic growth to slow to 1.2 per cent
Hong Kong and most Asia-Pacific stocks declined Wednesday on fears about the economic pain of the coronavirus as the International Monetary Fund warned the “Great Lockdown” will be the world’s worst economic downturn since the Great Depression.
The Hang Seng Index fell 1.2 per cent to 24,145.34, with oil stocks among those weighing on the benchmark. WH Group, the world's top pork producer, dropped 3.2 per cent to HK$7.51. Its subsidiary Smithfield Foods shut one of the largest plants in US after employees at the facility caught the coronavirus.
The IMF expects China’s first-quarter economic growth to slow to 1.2 per cent, depressing investor sentiment in the Asia-Pacific region.
“[The downgrade is] a major revision over a very short period. This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis,” said Gita Gopinath, the IMF’s research economic counsellor and director.
The IMF expects economic contractions this year of 4.8 per cent in Hong Kong, 5.2 per cent in Japan, 5.9 per cent in the United States and 7.5 per cent in the 19 European countries that share the euro currency.
More fresh and positive news on the coronavirus pandemic is needed to boost the Hong Kong benchmark but that remains to be seen after the IMF slashed its global economic growth forecast, said Louis Tse, managing director at VC Asset Management.
“Investors such as short-term traders and fund managers have trimmed down their portfolio during this bear market rebound [because] after this rebound, the market could either stay put at this level or go lower,” Tse said. The Hang Seng Index fell into bear territory on March 13, when the benchmark tumbled 20 per cent from its April 2019 peak.
On the mainland, the Shanghai Composite Index slid 0.6 per cent to 2,811.17. Stocks linked to gardening engineering, jewellery and hotels declined, according to gauges tracking them.
The People's Bank of China on Wednesday cut its medium-term lending facility (MLF) rate to 2.95 per cent from 3.15 per cent and skipped reverse repo operations, injecting 100 billion yuan in liquidity. The reaction over the cut was less than enthusiastic as the 20 basis-point reduction in the MLF rate was widely expected, according to Bloomberg.
Lockdowns, strong policy support, easing of liquidity and cheaper market valuations are helping the markets during uncertainty caused by the coronavirus pandemic, said Kelvin Blacklock, head of investment solutions at Eastspring Investments.
“Stock and credit markets have responded positively to the unprecedented policy responses and have partially retraced prior declines. We believe that this is the start of bottoming process which can historically last for many months,” he wrote in a note.
In the Asia-Pacific region, Japan’s Nikkei 225 slid 0.5 per cent, after jumping 3.1 per cent on Tuesday.
Australia’s S&P/ASX200 fell 0.4 per cent, as consumer confidence posted the biggest fall on record, according to Bloomberg.
New Zealand’s NZX 50 Gross gained 2.4 per cent, building on its 2 per cent rise the day before.
Meanwhile, in Singapore, the Straits Times Index fell 1.5 per cent, after gaining 2.4 per cent on Tuesday.
South Korean markets were closed for the general election.
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