Asian markets plunge, yen and gold rally as virus fears mount

HONG KONG (AFP) – Asian equities tumbled yesterday as analysts warned the volatility that has characterised markets during the coronavirus crisis is likely to continue for some time.

While governments and central banks have unleashed or prepared to roll out stimulus measures, the rapid spread of the disease and rising death toll are putting a strain on economies and stoking concerns of a worldwide recession.

And with no end seemingly in sight – almost 100,000 people in 85 countries have now been infected – investors are fleeing out of risk assets such as stocks and into safe havens including the yen and gold.

“All we know now is that we don’t really understand what’s going to happen next,” Head of Marketfield Asset Management Michael Shaoul told Bloomberg TV.

“It’s probably four, six, eight weeks before we’re going to have any useful information as to what the trajectory of the virus is and what the actual economic fallout looks like.”

The epidemic has wreaked havoc on international business, tourism, schools and sports events, and the World Health Organization (WHO) raised concerns about how the outbreak was being handled.

Tokyo ended the day down 2.7 per cent, while Shanghai fell 1.2 per cent and Hong Kong shed 2.3 per cent.

A pedestrian walks past a quotation board displaying a share price of the Tokyo Stock Exchange. PHOTO: AFP

Sydney, Seoul, Bangkok and Jakarta all lost more than two per cent, while Singapore, Wellington and Manila were more than one per cent down. Mumbai plunged three per cent, with Yes Bank crashing more than 70 per cent at one point after the central bank seized control and imposed withdrawal limits as it struggles with a mountain of bad debt.

In early trade, London dived 1.8 per cent, while Paris and Frankfurt each retreated two per cent.

CMC Markets analyst David Madden said the fact that so many governments around the world were now putting resources into the fight had in itself spooked traders. “At a certain point… intervention increases nervousness,” he wrote in a note.

Observers also suggested the selling was fired by investors protecting their portfolios ahead of the weekend in case of any more negative headlines, with warnings that monetary policy only had a limited effect as the virus continues to spread.

“Investors are starting to price in worst-case scenarios… and are now accelerating their hedging game plans for the eventuality of the eurozone falling into recession and the United States (US) economy stagnating in the first half of the year,” said AxiCorp’s Stephen Innes.

With dealers flocking to safety and yields on US Treasuries at record lows, gold has rallied more than five per cent this week to sit at more than seven-year highs.

And the yen, the main go-to currency for traders in times of crisis, continued to rise against the dollar, with the Federal Reserve’s shock rate cut this week adding to downward pressure on the greenback.