Australia’s Record-Breaking Rally Stuns Traders, Lifts Markets
Australian Stocks Turn Green Amid Largest Price Swing on Record
(Bloomberg) -- Australian stocks staged a record-breaking intraday rebound in the midst of near universal market gloom, a move that bewildered some traders but nonetheless quickly spread to other riskier assets.
In one of the wildest sessions ever for Australia’s nearly $1 trillion market, the benchmark S&P/ASX 200 Index swung from an 8.1% loss to a 4.4% gain -- the biggest intraday move since the gauge was created in 2000. Everything from S&P 500 Index futures to Indian shares and the Chinese yuan soon followed suit, though in some equity markets the rebound wasn’t enough to lift indexes into the green.
Traders cited multiple potential reasons for the sudden recovery, from simple bargain hunting to a Reserve Bank of Australia cash injection into the financial system and Prime Minister Scott Morrison’s decision to refrain from closing schools and public transport. Yet the move still shocked some investors and underscored the historic levels of volatility in financial markets as the coronavirus pandemic clouds the outlook for economies around the world.
“Much of this remains in peril’s path with no headline to confirm what is going on,” said Stephen Innes, chief Asia market strategist at Axicorp.
The S&P/ASX 200 ended the day with its biggest advance since November 2008, though it was still down nearly 11% for the week. It fell into a bear market on Wednesday, 14 trading days after hitting a record high.
The RBA pumped the most extra cash into funding markets in at least seven years on Friday, after financial institutions’ demand came in at more than double the amount the central bank signaled it would inject. The RBA dealt A$8.8 billion ($5.5 billion) in its open market operations, after saying it intended to offer A$3.7 billion.
“It’s the central bank injection that has probably calmed investors nerves over a liquidity crisis, major buyers could be the big pension funds,” said Justin Tang, head of Asian research at United First Partners in Singapore. “Looks like nerves are steadied.”
Of the country’s big four banks, shares of National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. saw the wildest fluctuations, swinging more than 15% through the session. Hearing aid maker Cochlear Ltd. rose as much as 17% after early losses of 5.6%. Viva Energy Ltd. fluctuated between a 13% gain and 11% decline.
Most sectors finished up for the day, led by health care and energy shares. Utilities and real estate stocks were the biggest laggards, down more than 2%.
Volume on the ASX 200 skyrocketed to levels more than three times its three-month daily average, according to data compiled by Bloomberg.
“You’re getting a lot of people potentially trying to think that this is the bottom,” said Jessica Amir, a market analyst at Bell Direct Ltd. “You’re seeing volume increase, people taking advantage of cheaper prices that are comparatively different from where they were about three weeks ago.”
--With assistance from Garfield Reynolds and Ishika Mookerjee.
To contact the reporters on this story: Jackie Edwards in Sydney at jedwards160@bloomberg.net;Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net
To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Tim Smith, Michael Patterson
©2020 Bloomberg L.P.
