Hong Kong’s benchmark jumped by the most in almost a decade Friday as it led a broad rally in Asia-Pacific markets, as sentiment improved on steps by global central banks and policymakers to cushion damage by the coronavirus pandemic.
The US Federal Reserve took measures to address a liquidity crunch that swept almost every class of financial assets and the European Central Bank ramped up debt purchases, helping to power Europe’s Stoxx 50 Index 3 per cent higher and boosting all three US benchmarks.
The improved sentiment comes even after dramatic news continued to dominate headlines. US jobless claims rose to the highest in more than two years and the total fatalities in Italy surpassed those in China, despite its population being less than 5 per cent of that of the Asian nation.
Meanwhile, California – which, if it were a country, would be the world’s fifth largest economy – has ordered its 40 million residents to stay home. The governor of the state that is home to Silicon Valley said modelling shows half of the residents could become infected over the next eight weeks – a startling possibility that would overwhelm hospitals. Iran, a hotspot in the virus spread, said it is seeing a death every 10 minutes.
The Hang Seng Index advanced 5.1 per cent to 22,805.07, adding 1,095.94 points, as bargain hunters swooped in. That is the best performance for the 50-member benchmark since December 2011. Even with that big gain, the gauge still fell 5.1 over the week. Commerce and industry stocks led the gain, followed by properties and finance, according to Hang Seng gauges.
Heavyweight Tencent Holdings ran up 4.8 per cent, while CK Asset Holdings shot up 12 per cent on its 2019 results, and casino operator Galaxy Entertainment also soared 12 per cent. (For in-depth coverage of the Hong Kong and mainland stock markets, see the Stocks Blog.)
“It is driven by central banks’ action,” Kenny Wen, wealth management strategist at Everbright Sun Hung Kai, said of the big run-up in Hong Kong stocks.
“After central banks deployed different emergency measures globally to try to buffer the economy, sentiment improved. Also after sharp correction, some investors believe the valuations of the Hang Seng Index are attractive,” he said.
“Aggressive investors may focus on 5G and IT stocks. But I still think it is just a short-term rebound, not a long-lasting rally. The key remains the future development of the virus outbreak,” he said.
The Shanghai Composite Index closed ahead 1.6 per cent to 2,745.62, rising for the first time in eight sessions, paring the weekly loss to 4.9 per cent. Speculation was mounting that the central bank will cut the benchmark interest rate after it left the loan prime rate, a market-based borrowing cost commercial lenders charge on companies, unchanged for this month.
South Korea’s Kospi index gained 7.4 per cent after an 8.4 per cent tumble a day earlier, and Australia’s S&P/ASX 200 index advanced 0.7 per cent. New Zealand’s benchmark was little changed.
Japan’s market was closed for a public holiday.
The Philippine Stock Exchange reopened and rose 3.4 per cent. It has been getting a lot of attention after its decision to shut down for two days after massive stock losses due to coronavirus turmoil. It reopened Thursday but shut down at 1pm amid continued declines.
Hong Kong’s stock exchange operator has said it will not shut down over the volatility caused by the virus.
“US stock markets are showing some signs of stabilisation as hopes start to grow that progress was made in finding new virus treatments and by a boatload of stimulus by both central banks and governments will put the global economy in position for a U-shaped recovery once the market is beyond the virus,” said Edward Moya, an analyst at Oanda in New York.
US futures pointed to gains, while European markets from Germany to the UK saw early gains.
BlackRock expects the volatile global markets to settle down once the scale and impact of the coronavirus pandemic is better understood and fiscal and monetary policy response boosts confidence that financial markets are functioning properly.
The world’s biggest asset manager said pledged policy responses have been swift and it expects total fiscal stimulus to be similar in size to that of the financial crisis but in a shorter time frame.
“We believe market volatility is distracting from the sheer amount of promised stimulus – with more to come,” the note said. “This is why we stay neutral on risk assets and believe investors should take a long-term perspective.”
In a series of new coordinated global efforts to arrest a possible recession in global growth, the Federal Reserve introduced a backstop for money market funds to ease a liquidity squeeze rattling the financial markets, the ECB embarked on a bond buy-back programme totalling €750 billion and the Bank of England lowered the borrowing costs to a record 0.1 per cent.
Meanwhile, the US told Americans to return home or plan to stay put abroad, as the State Department issued its highest warning urging Americans not to travel abroad. President Trump ramped up his complaints about China, where the outbreak began.
“It could have been stopped right where it came from – China – if we would have known about it,” he said at a news conference on Thursday. “But now the whole world, almost, is inflicted with this horrible virus.”
Additional reporting by Gigi Choy