Asia Stocks Sink Deeper as Central Banks Hit Crisis Mode

(Bloomberg) --

A fresh wave of urgent policy coordination by global central banks has failed to restore stock investors’ confidence in Asia.

With traders scrambling to sell riskier assets, benchmark indexes sank across the region, sending the MSCI Asia Pacific Index down as much as 4% to a level unseen since 2016, based on closing prices. Futures on the S&P 500 Index hit trading limits once again, indicating a volatile week ahead for U.S. equities following a surge on Friday.

While Australia’s S&P/ASX200 Index had its worst day in history with an almost 10% slump, shares in Japan failed to defy a short-lived rebound as the Bank of Japan’s emergency measures disappointed investors. Smaller bourses in Southeast Asia were again hammered, with gauges in Thailand and Philippines posting more than 5% declines. Even Chinese equities, which had been resilient to the selling, registered losses of more than 3%.

Monday’s plunge has again highlighted investors’ fragile confidence over a series of urgent central bank actions. Waking up to U.S. Federal Reserve’s 100-basis-point cut, the Bank of Japan said it would buy more assets including exchange-traded funds and corporate bonds while holding interest rate steady. The Bank of Korea slashed its benchmark interest rate to a record low of 0.75% in an emergency move.

“Looming increases in new infection cases in the U.S. and EU will ultimately overwhelm the Fed and other central banks’ announcements in the near-term,” said David Chao, a market strategist for Asia Pacific (ex-Japan) at Invesco.

In the latest coronavirus outbreak developments, cases of infection have topped 166,000 worldwide, while deaths exceed 6,400. Click here for the latest update.

“Nobody can call a bottom precisely -- everyone needs to keep following the virus and the qualitative indicators,” said Justin Tang, head of Asian research at United First Partners in Singapore. “Most of the epidemic and contagion-led sell offs have lasted for 3 to 5 months so investors should keep that context in mind.”

Still, some investors believe markets are approaching a turning point. Global markets are at “a turning point in volatility. Markets first react negatively to rate cuts only to reverse the initial negative move shortly after,” said Nader Naeimi, head of dynamic markets at AMP Capital Investors Ltd. in Sydney. “I believe we are close to a tradeable low in markets.”

--With assistance from Min Jeong Lee.

To contact the reporters on this story: Moxy Ying in Hong Kong at yying13@bloomberg.net;Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net

To contact the editor responsible for this story: Lianting Tu at ltu4@bloomberg.net

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