Logo of Phnom Penh Post newspaper Phnom Penh Post - Equities plunge as economy fears continue

Equities plunge as economy fears continue

Content image - Phnom Penh Post
Asian markets tumbled on Monday as interest rate cuts and fresh stimulus measures by central banks failed to lift confidence. AFP

Equities plunge as economy fears continue

Asian markets tumbled on Monday as interest rate cuts and fresh stimulus measures by central banks failed to lift confidence, with analysts warning that the Federal Reserve may have reached the limits of its power to fend off recession as the coronavirus spreads.

The Fed move added to efforts by central banks around the world to combat the outbreak, which observers say will likely cause a global recession.

The scale of the crisis was laid bare by data showing Chinese industrial production for January and February shrank 13.5 per cent, the first contraction in around 30 years.

Equity markets continue to be whipsawed by the disease, which has now infected almost 170,000 people and killed more than 6,000 with several countries going into lockdown as Europe becomes the new epicentre of the outbreak.

The Fed on Sunday slashed borrowing costs to almost zero – its second emergency cut in less than two weeks – and unveiled a massive asset-buying programme, similar to measures put into place during the global financial crisis.

The Bank of Japan on Monday unveiled a series of emergency monetary policy measures, saying it would ramp up its own bond-buying programme.

New Zealand’s central bank also slashed rates to record lows in an attempt to cushion the economic blow, while the People’s Bank of China has injected vast sums into financial markets to ease liquidity worries.

In joint action coordinated with the European Central Bank, Bank of England, Bank of Japan, Bank of Canada and the Swiss National Bank, the central banks moved to counteract global “dollar funding pressures”, said Fed boss Jerome Powell.

But traders were left unimpressed, with the virus showing no sign of letting up, while the head of the World Health Organisation, Tedros Adhanom Ghebreyesus, said it was impossible to tell when it would peak globally.

“While these moves may go some way to easing any potential blockages in the plumbing of the financial markets, they won’t adequately compensate for the upcoming economic shocks that are about to come our way as a result of the events currently unfolding across Europe, as borders get closed and populations get locked down,” said CMC Markets analyst Michael Hewson.

Sydney led losses, tumbling 9.7 per cent in its worst drop on record, while Manila shed nearly eight per cent and Bangkok and Mumbai dropped more than five per cent.

Hong Kong, Singapore, Taipei and Jakarta all lost more than four per cent. Wellington and Seoul were more than three per cent off.

Shanghai dropped tumbled 3.4 per cent after the release of the industrial production data, which came a week after news that Chinese exports had collapsed.

Tokyo ended 2.5 per cent lower, after a rally sparked by the Bank of Japan’s support measures announcement fizzled.

In early trade, London, Frankfurt and Paris all lost more than four per cent.

The broad retreat follows a tumultuous week that saw some stock markets suffer their worst days in decades and in some cases their worst ever.

And experts said there was a concern that the Fed might be running on empty with regards to further action.

Sunday’s move “raises the question of whether the Fed has anything left in the tank should the spread of the virus not be contained”, said Kerry Craig at JP Morgan Asset Management.

“Our view is that the drag on the services sector from social distancing policies and shock from the fall of the oil price on the energy sector will be enough to tip the US into recession, but not necessarily a long one.”

The unease has seen futures on Wall Street tumble around five per cent.

“The biggest concern has to be that the big G7 central banks have exhausted their policy tool kit,” said AxiCorp’s Stephen Innes.

“The markets now appear kind of defenceless to another selling onslaught, so the fiscal step is crucial in avoiding a dreaded global credit event.”

On currency markets, the dollar dropped against the yen after the Fed rate cut, though the greenback was up against higher-yielding, riskier assets such as the Australian dollar and the Thai baht.

Oil dropped again, hit by a price war between major producers Saudi Arabia and Russia adding to demand concerns caused by the virus.

MOST VIEWED

  • ‘Kingdom one of safest to visit in Covid-19 era’

    The Ministry of Tourism on January 12 proclaimed Cambodia as one of the safest countries to visit in light of the Kingdom having been ranked number one in the world by the Senegalese Economic Prospective Bureau for its success in handling the Covid-19 pandemic. In rankings

  • Kingdom accepts Chinese vaccine, PM first to get jab

    Prime Minister Hun Sen said China would offer Cambodia an immediate donation of one million doses of the Covid-19 vaccine produced by the Sinopharm company. In an audio message addressing the public on the night of January 15, he said Cambodia has accepted the offer and

  • Reeling in Cambodia’s real estate sector

    A new norm sets the scene but risks continue to play out in the background A cold wind sweeps through the streets of Boeung Trabek on an early January morning as buyers and traders engage in commerce under bright blue skies. From a distance, the

  • Hun Sen: Lakes filled in for national developments

    Prime Minister Hun Sen has announced continued operations to fill some lakes in Phnom Penh to create land for developments, though he is against the unrelated practice of damming rivers or blocking waterways. Speaking at the inauguration of the Ministry of Public Works and Transport

  • Local media loses a giant, and The Post a great friend

    Cheang Sokha, a gifted and streetwise reporter who rose to the highest ranks of Cambodian media and was beloved for his sharp intelligence, world-class humour and endless generosity, died on Friday in his hometown of Phnom Penh. He was 42. His wife, Sok Sophorn, said he

  • PM asks India for vaccine help

    Prime Minister Hun Sen is seeking assistance from India for the provision of Covid-19 vaccines as the country has produced its own vaccine which is scheduled to be rolled out to more than 300 million Indians this year. The request was made during his meeting with