Asia shares bounce back as BOJ promises support for economy

BANGKOK (AP) — Share prices in Asia bounced back yesterday from last week’s retreat, with mainland Chinese indexes gaining more than three per cent as data showed progress in restoring factory output after weeks of disruptions from the viral outbreak.

Stocks have been swooning as investors fret the coronavirus outbreak will derail the global economy. But in those declines, some see opportunities to buy.

Japan’s Nikkei 225 index recovered from early losses, gaining one per cent to 21,345.54 after the Bank of Japan (BoJ) promised to step in to support the economy. The Shanghai Composite index rose 3.1 per cent to 2,969.57. The benchmark for the smaller exchange, in Shenzhen, jumped 3.4 per cent, while South Korea’s Kospi climbed one per cent to 2,006.63. The Hang Seng in Hong Kong jumped 0.8 per cent to 26,345.77 and India’s Sensex advanced 1.6 per cent to 38,909.43.

BoJ Governor Haruhiko Kuroda issued a statement yesterday, after an early plunge in share prices, saying the central bank “will closely monitor future developments, and will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases”.

On Friday the BOJ issued plans for purchases of assets for the coming weeks: the central bank already buys tens of billions of dollars’ worth of government bonds and other assets each year as part of its aggressive efforts to maintain cheap credit to help prevent deflation.

A woman walks past an electronic board showing world currency exchange rates at a securities firm in Tokyo. PHOTO: AP

Shares fell in Australia, where the S&P ASX/200 lost 0.8 per cent to 6,391.50 and in Taiwan, which fell 1.1 per cent. Stocks were mostly higher in Southeast Asia, and Bangkok’s benchmark surged 0.9 per cent.

United States (US) futures saw a moderate recovery, with the contract for the Dow Jones Industrial Average rising 0.8 per cent while the future for the S&P 500 added 0.7 per cent.

“It may well be a case of news being not as bad as it could have been,” Jeffrey Halley of Oanda said in a commentary. “Today’s rallies across Asia have a definite relief rally look to them. Measured against the scale of last week’s sell-offs, the bounces this morning are small.”

Stocks sank on Friday on Wall Street, extending a rout that left the market with its worst week since October 2008. The Dow fell 1.4 per cent to 25,409.36. The S&P 500 slid 0.8 per cent to 2,954.22, while the Nasdaq rose 0.1 per cent, to 8,567.37. The Russell 2000 index of smaller company stocks lost 1.4 per cent, to 1,476.43.

Meanwhile, bond prices have been soaring as investors seek safety, pushing yields to record lows. Yesterday, the yield on the 10-year Treasury note, a benchmark for home mortgages and many other loans, was at a record low 1.09 per cent, down from 1.14 per cent Friday and 1.30 per cent late Thursday.

The damage from the week of relentless selling of shares was eye-popping: The Dow Jones Industrial Average fell 3,583 points, or 12.4 per cent. Microsoft and Apple, the two most valuable companies in the S&P 500, lost a combined USD300 billion. In a sign of the severity of the concern about the possible economic blow, the price of oil sank 16 per cent.

The market’s losses moderated on Friday after the Federal Reserve released a statement saying it stood ready to help the economy if needed. Investors increasingly expect the Fed to cut rates at its next policy meeting in mid-March.

The virus outbreak that began in central China has rattled markets as authorities shut down industrial centres, emptying shops and severely crimping travel all over the world.

Companies are warning investors that their finances will take a hit because of disruptions to supply chains and sales. Governments are taking increasingly drastic measures as they scramble to contain the virus.

The rout has knocked every major index into what market watchers call a “correction”, or a fall of 10 per cent or more from a peak. The last time that occurred was in late 2018, as a tariff war with China was escalating. Market watchers have said for months that stocks were overpriced and long overdue for another pullback.

The latest losses have wiped out the S&P 500’s gains going back to October. The benchmark index is still up 6.1 per cent over the past 12 months, not including dividends. Its weekly loss of 11.5 per cent was the biggest since an 18.2 per cent drop in the week ending October 10, 2008.

Crude oil prices rebounded yesterday. US benchmark crude gained 2.7 per cent, or USD1.22 to USD45.98 per barrel in electronic trading on the New York Mercantile Exchange.

It sank 4.9 per cent on Friday over worries that global travel and shipping will be severely crimped, hurting demand for energy. The price of benchmark US crude fell 15 per cent last week.

Brent crude, the international standard, jumped USD1.51 to USD51.18 per barrel. The latest data show China’s manufacturing plunged in February as anti-virus controls shut down much of the world’s second-largest economy.