Asia markets still jittery over possible global recession due to chaos by coronavirus

Deb Price

Asia-Pacific markets had the jitters Tuesday, after the biggest sell-off ever of US equities overnight and the assessment by President Donald Trump that the world’s largest economy “may be” headed for a recession over the coronavirus.

Hong Kong’s Hang Seng Index closed with a 0.9 per cent gain at 23,263.73, ending a four-day losing streak.

A technical gauge signals that the 50-member benchmark is extremely oversold, and valuations have sunk to the cheapest level since the European debt crisis in 2011.

China’s Shanghai Composite Index closed in negative territory for a fifth straight day, ending 0.3 per cent lower. [For in-depth Hong Kong and mainland market coverage, see the Stocks Blog.]

Elsewhere in the Asia-Pacific region, markets were mixed. But, like Hong Kong, most took a break from jaw-dropping swings of late.

Hong Kong, Asian stocks on flash sale as valuations slide as fast as during European debt crisis. The rebound may be swift

Seoul’s Kospi dropped 2.5 per cent, and the tech-heavy Kosdaq increased 2 per cent.

Tokyo’s Nikkei 225 closed up a teensy 0.06 per cent.

Australia’s S&P/ASX200 closed with a 5.8 per cent gain, while New Zealand’s S&P/NZX50 fell 0.5 per cent.

Asian-Pacific investors were trying to regain confidence, after the Dow Jones Industrial Average tumbled 13 per cent in its worst single-day performance ever. Sentiment recovered a bit as US index futures pointed up in Asian hours of trading, and triggered an up-limit circuit breaker.

“Traders are still waiting for a bottom signal, and very sensitive to any news and nervous about any market movement,” said Alan Li, portfolio manager at Atta Capital. “From the experience in [China] A shares, the market bottom should be far ahead from the virus peak out. The market may regain its confidence when people believe the policies against virus may eventually contain the virus spread, and the deleveraging process comes to an end.”

A sense of surrealness continues to hang over markets.

Coronavirus turns stock markets into the wildest ride on the planet – and that’s not likely to change soon

The Philippines Stock Exchange halted stock, bond and currency trading until further notice “to ensure the safety of employees and traders in light of the escalating cases of the coronavirus disease (Covid-19),” it said on its website.

So much talk is going around investor circles about whether the world’s markets should take a holiday that New York Stock Exchange President Stacey Cunningham put out a statement saying that while she is sympathetic to investors’ concerns about wild price swings of late, “It is important for the markets to remain open, and for them to function in a fair and order manner.”

The Hong Kong Exchanges and Clearing Limited, the operator of the city’s stock exchange, said it remains committed to staying open.

“HKEX has seen recent heightened trading volumes and volatility across its markets, reflecting the broader macro environment. Throughout, HKEX’s markets have continued to be fair and orderly, and have operated as normal. HKEX remains fully committed to ensuring transparent, open, and liquid financial markets, whatever the prevailing market conditions,” the press office replied when asked whether there might be a virus holiday.

Meanwhile, Trump has dramatically changed his tone on the threat of the virus, which has now killed at least 68 in the US and more than 7,000 people worldwide.

He encouraged online schooling, gatherings no larger than 10 people, and said people should avoid eating and drinking at bars and restaurants. He said the virus’ threat in the US could go on through August. And in a Tweet sparking immediate backlash, he referred to the coronavirus as the “Chinese Virus.”

The United States will be powerfully supporting those industries, like Airlines and others, that are particularly affected by the Chinese Virus. We will be stronger than ever before!— Donald J. Trump (@realDonaldTrump) March 16, 2020

IHS Markit predicts the coronavirus will push the US economy into a consumer-led recession in the second quarter and growth will probably shrink by 0.2 per cent this year. A recession requires two back-to-back months showing a decline in growth.

“The spread of Covid-19 to the US is causing a sharp contraction in spending on activities that involve travel and congregating in public,” IHS Markit chief US economist Joel Prakken wrote in a new note.

Coronavirus: will a mandatory lockdown be in the US’ future?

Goldman Sachs lowered its projection for China’s economic growth this year to 3 per cent from 5.5 per cent previously, citing ongoing overseas disruption caused by Covid-19 that will hamper and slow the economic recovery in the Asian nation. Expansion at the Asian nation may contract by 9 per cent in the first quarter based on high-frequency data, the US investment bank said.

“We are living through one of those rare moments in history when pretty much every human being on earth is probably thinking about the same thing at the same time,” said Stephen Innes, global chief markets strategist at AxiCorp, who calls this moment the “monster Grizzly Bear market of them all.”

In the mainland, manufacturers of masks and medical protective suits, the hottest stocks amid the height of the coronavirus outbreak in China, bore the brunt of selling, as the nation has reported a single-digit increase in local infection cases over the past few days. Only one local case was reported from within the mainland, while other 20 all came from overseas.

Medical staff dispatched from other parts of the country to treat patients in Wuhan, the epicentre of the pandemic outbreak, have also been asked to gradually pull out of the city, as the viral transmission has been brought under control.

Gauges tracking the producers of masks and protective clothing dropped at least 2.3 per cent on Tuesday. Among them, Shenzhen Glory Medical tumbled by the 10 per cent daily cap to 11.18 yuan, Xinlong Holding sank 9 per cent to 10.71 yuan and Shandong Dawn Polymer slid 8.2 per cent to 41.86 yuan.

Additional reporting by Gigi Choy

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