[Analytics] Asia-Pacific markets including Hong Kong rally as investors weigh stimulus packages

Tencent, CK Asset Holdings, casino stocks soar in Hong Kong. Overnight, US markets gained; Italy now has surpassed China in virus deaths. Zhang Shidong, Deb Price specially for the South China Morning Post.

Asia-Pacific markets rallied Friday, taking cues from overnight gains in US and European stocks, as sentiment improved after efforts by global central banks and policymakers to cushion the damage caused 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 some brutal 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.

The Hang Seng Index advanced 2.8 per cent to 22,318.82 at the lunch break, trimming back some of its bigger earlier gain. Heavyweight Tencent ran up 2.9 per cent, while CK Asset Holdings shot up 12.4 per cent on its 2019 results, and casino operator Galaxy Entertainment soared 8.7 per cent.

“It is driven by central banks’ action,” Kenny Wen, wealth management strategist at Everbright Sun Hung Kai, said of the big runup 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 rose 0.5 per cent to 2,715.

South Korea’s Kospi index gained 4.6 per cent in early trading after an 8.4 per cent tumble a day earlier, and Australia’s S&P/ASX 200 index advanced 2 per cent. New Zealand’s benchmark was little changed.

Japan’s market was closed for a public holiday.

The Philippine Stock Exchange reopened with stable gains, last at 2.6 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 declined.

Hong Kong stocks may remain volatile for months due to Covid-19 pandemic, says analyst Kenny Wen
“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.

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 response has 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. Zhang Shidong is based in Shanghai and reports on business for the Post. Deb Price joined the Post in 2018.