Asia stocks advance on surprise gain in Chinese manufacturing, global stimulus to stave off recession

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

Most Asia markets advanced Tuesday, as investors weighed a surprise expansion in Chinese manufacturing and global stimulus steps against the mounting human and economic toll of the coronavirus pandemic.

China’s Purchasing managers’ Index rose to 52 in March, above the 50 threshold that signifies expansion, the National Bureau of Statistics said on Tuesday. Analysts polled by Reuters had expected activity to contract, with a consensus for 45 on the index. The gauge slumped to a historic low of 35.7 in February amid a lockdown that forced many factories to close as part of China’s efforts to contain the viral outbreak. But analysts warned China faces serious challenges ahead, including a sharp weakening of foreign demand for Chinese goods as one-third of the world’s population is now on lockdown, unending consumer appetite.

The Hang Seng Index advanced 1 per cent as of 3pm to 23,396.59. It will need an extra catalyst to break through 24,000, said Alan Li, portfolio manager at Atta Capital.

“The market downside is limited due to excessive liquidity, so money is switching between sectors,” Li added. “Traders are chasing the stocks with better annual results.”

The Shanghai Composite Index closed with a 0.1 per cent gain.

The S&P 500 Index climbed 3.4 per cent overnight as the White House prepares for another round of policy stimulus amid rising cases of coronavirus in New York.

“Stock market price action suggests that investors are comfortable with the ‘whatever it takes, whatever is necessary’ policymakers’ response so far into a deep economic recession,” said Stephen Innes, chief global strategist at AxiCorp.

“At a minimum, the massive monetary and fiscal stimulus gives investors some breathing room with fingers crossed for a health care solution,” he said. They are bidding up shares of health care companies which could help stem the outbreak, he added.

Nearly 37,000 people around the globe have died from the pandemic, which began with an outbreak in China. The world is staring at a recession, according to the International Monetary Fund.

Doctors in US cities like New York are describing the pandemic as akin to a battlefield medical situation. Makeshift tents to treat the ill were set up in the iconic Central Park.

President Donald Trump predicted the peak of infections could come in two weeks. Jobless claims hit an all-time record of 3.3 million last week, and 2.7 million could be announced this week, according to a Dow Jones survey of economists, as struggling business lay off workers. The jobless rate could skyrocket to 30 per cent, which would be worse than in the Great Depression, St. Louis Federal Reserve President James Bullard has said.

Elsewhere, Seoul’s Kospi closed up 2.2 per cent. The tech-heavy Kosdaq jumped 5 per cent.

Tokyo’s Nikkei 225 fell 0.9 per cent.

Australia’s S&P/ASX200, closed down 2 per cent. It has been highly volatile, dropping 5.3 per cent on Friday but shooting up 7 per cent on Monday, in a record one-day gain. Australia announced an unprecedented stimulus plan Monday to help workers and businesses suffering from the coronavirus, as the country faces its worst recession in 90 years.

New Zealand’s S&P/NZX50 rose 1.4 per cent.

Meanwhile, Singapore’s Straits Times Index gained 1.9 per cent to recoup some of its 4.5 per cent slump on Monday.

Singapore aggressively eased its monetary policy on Monday as the worst recession in the city-state’s 55-year history looms. That came after Singapore unveiled a stimulus package worth more than $30 billion, taking total virus-relief spending delivered this year to almost 11 per cent of GDP.

Regarding China’s manufacturing data, serious challenges are ahead and more policy support can be expected, Bloomberg Intelligence economists Chang Shu and David Qu predicted.

“Looking ahead, China’s economic outlook is extremely challenging in the coming months. The domestic economy is struggling to fully return to work. The increasing number of imported virus cases means containment measures will remain in place, restraining the pace of economic recovery,” they wrote in a new note.

“Firms continue to face wide-ranging challenges such as insufficient demand, staffing, funding, liquidity and interrupted supply chains. The challenges are particularly large for small private firms.

“Outside of China, countries are imposing increasingly stringent containment measures, bringing a large number of economies to a sudden stop and significantly weakening external demand for China’s economy,” they wrote.


Category: FinanceAsia

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