Asian stock markets revert to declines as buzz from cash hand-outs gives way to pessimism about worsening coronavirus outbreak
- Tencent, Alibaba, AAC Tech, Sands China are among losers of more than 4 per cent
- Hang Seng lost nearly 1,000 points
Stock market carnage returned Wednesday, as Asia-Pacific markets tumbled on global pessimism about the spreading coronavirus, with Hong Kong, South Korea and Australia leading losses.
US futures fell despite the US$1 trillion stimulus package in the works in the world’s largest economy to mitigate the economic fallout of the novel virus.
Hong Kong’s Hang Seng Index plunged 4.2 per cent, or 971.91 points, to 22,291.82, with 49 of the 50 constituent members posting losses. This was the fourth time this year the Hang Seng Index has dropped more than 900 points. On March 9, the gauge tumbled by 1,106 points.
The Hang Seng last traded around that level in January 2017. Investors have seen their portfolios clobbered, and the benchmark is down 20 per cent for the year.
Big name companies listed in Hong Kong fell hard. Stocks falling more than 4 per cent included Tencent, Alibaba, AAC Tech, Sunny Optical and casino operator Sands China. (Alibaba is the parent company of the South China Morning Post.)
The Shanghai Composite Index turned down as well, closing with a 1.8 per cent loss.
Three major benchmarks in the Asia-Pacific region sank more than 3 per cent on Wednesday, with Australia’s S&P/ASX 200 posting the biggest decline with a 6.4 per cent drop. South Korea’s Kospi slid 4.9 per cent, followed by the Hang Seng Index. New Zealand’s S&P/NZX 50 Index bucked the bearish sentiment, adding 0.2 per cent.
“It is hard to know when the sell-off will end,” said Alan Li, portfolio manager at Atta Capital. “Traders still tend to sell on rebounds to enhance their cash levels. If policies to fight the virus work, new infected cases may peak out in the next two weeks. Markets will keep an eye on the effectiveness” of policies, like border and air traffic restrictions, closures, quarantines and discouragement of large gatherings.
The decline in the region came as some economists say the world is falling into recession, including the US, the world’s largest economy, because of the upheaval caused by the coronavirus.
US Treasury Secretary Steven Mnuchin warned Republican senators that, without major stimulus, the US jobless rate could soar to 20 per cent, according to Bloomberg. That would be a dramatic turn: the US unemployment rate in February was at a five-decade low at 3.5 per cent.
He told them the economic damage by the respiratory illness could be worse than the 2018 financial crisis, according to Bloomberg.
European futures also pointed to another painful and frightening day for the world’s investors.
Globally, policymakers including central banks have taken wide-ranging action to try to contain the virus and blunt its damage to businesses and workers.
Overnight, the three major US benchmarks surged by at least 5 per cent on the large stimulus package being worked on. While President Donald Trump did not reveal details of the relief package, the stimulus will probably include US$50 billion in aid for the airline industry, US$250 billion for small businesses and cash payments of US$1,000 to qualified Americans.
“[T]he big stimulus] will do little to open up supply chains until borders open and people come out of hibernation,” said Stephen Innes, global chief markets strategist at AxiCorp, who has called global markets roiled by the coronavirus “the monster Grizzly Bear market of them all.”
“ … [T] depth of where the recovery starts from very much depends of how aggressive the virus spreads in Europe and the US.
“All the money in the world isn’t going to make up for the porous containment efforts and lack of testing that should have been given priority from day one. … This will be a massively expensive lesson. And the tally goes on, as the greater the case count the bigger the government bailout packages need to be,” Innes said.
More than 30 benchmarks tracking the world’s major stock markets have plunged into bear market territory, as the novel coronavirus has spread globally, forcing closures of shops and factories. Earlier measures by the Federal Reserve, such as an emergency cut in borrowing costs and resumption of bond purchases, failed to convince investors enough was being done to arrest a slowdown in global growth.
The New York Stock Exchange and the Hong Kong exchange operator have said they will keep markets open, while acknowledging the pain investors are experiencing.
China has been more sheltered from the global turmoil, with the benchmark Shanghai Composite still some distance from a bear market. The Asian nation has largely contained the viral spread, reporting only a single-digit increase in local infected cases over the past few days.
“Overseas markets are still facing downside pressure and could impact the A-share market [in China],” said Fu Yanping, an analyst at China Galaxy Securities. “But the decline would be limited because of China’s effective containment measures, orderly factory re-openings and further room for policy easing.”
