Asia-Pacific markets tumble on epic plunge in oil futures amid coronavirus, reports N Korea leader is ill

23-Apr-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Hong Kong and other Asia-Pacific stocks declined Tuesday after West Texas crude futures fell into negative territory on massive oversupply amid the coronavirus pandemic and media reports that North Korea’s dictator is very ill.

Major Chinese oil players declined in Hong Kong. Oil tanker stocks rose in China’s markets as demand rises for their storage space. After the jaw-dropping drop, oil prices rebounded in Asia trading, but later West Texas crude futures fell again into the negative zone.

Meanwhile, media reports that the North Korean leader is in “grave danger after a surgery” weighed on investor sentiment. The reports were denied by Chinese and South Korean officials.

“The rumour about Kim is really a concern to markets, raising uncertainty about safety issues if he passes without a clear succession plan,” said Alan Li, portfolio manager at Atta Capital.

The Hang Seng Index finished down 2.2 per cent. Investors took money off the table in some new economy darlings as well that have recently seen huge run-ups, including Alibaba Health and Technology Information. However, Ping An Good Doctor continued its huge run-up, gaining nearly 80 per cent over the past four weeks.

China stocks fell, with the Shanghai Composite Index finishing with a decline of 0.9 per cent. (For in-depth coverage of local stock markets, see the Stocks Blog.)

Worries about the world’s oil glut and Kim’s health overshadowed signs of progress in the battle against the coronavirus, which has killed more than 170,000 people around the globe. New York, a hotspot in the US, has seen deaths fall for the sixth-straight day. Massachusetts, home to Harvard University and Boston, is one of the states emerging as a hotspot.

Meanwhile, investors are watching the beginning of experiments on how to un-lock lockdowns without seeing a spike in virus infections, which will be critical to restarting economies. Several US states and European countries began easing their stay-at-home restrictions. Switzerland, Germany Europe’s largest economy the Czech Republic and Finland began reopening certain shops on Monday while Norway and Denmark also restarted schools.

Also driving sentiment are earnings reports, which are showing the depth of wreckage by the virus.

“While the negative outlook for earnings is squarely in focus, investors are also confidently fixated on the world economy reopening, which should prove favourable for the equity markets. But what’s needed to push this market higher is a cure or a therapeutic regime,” said Stephen Innes, chief global markets strategist at AxiCorp, a currency trading platform.

Elsewhere in the Asia-Pacific region, Japan’s Nikkei 225 fell 2 per cent. The country saw its exports decline 11.7 per cent in March from a year earlier, while imports fell 5 per cent.

South Korea’s Kospi fell 1 per cent, while the tech-heavy Kosdaq declined 1.4 per cent.

In Australia, which is battling its worst recession in decades, the S&P/ASX200 declined 2.5 per cent.

New Zealand’s NZX 50 Gross Index fell 2.1 per cent. The country will ease its nationwide lockdown beginning next week. Most businesses can reopen, along with some schools, while rules on local travel will be relaxed.

Meanwhile, Singapore’s Straits Times Index closed down 1.7 per cent. The city state has reported the highest number of Covid-19 infections in Southeast Asia.

On oil, US May futures plunged below zero overnight for the first time in history. The price on the May futures contract for US West Texas Intermediate (WTI) crude due to expire Tuesday tumbled to minus $37.63 a barrel, falling into negative territory.

“The COVID-induced evaporation in demand will keep the oil market under pressure. Even as/if virus containment measures ease in the coming weeks, the world is going to be awash in oil for some time economies may be slow to get back up and running to a pace that would warrant a strong increase in demand, especially when it comes to international travel,” said Tai Hui, chief Asia market strategist at J.P. Morgan Asset Management.


Category: FinanceAsia

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