A terrible week for Asian stocks started to look a bit better as Friday evolved.
As Asia woke up to the worst Wall Street sell-off since 1987, benchmark indexes sank across the region, triggering trading halts from Seoul to Bangkok, Manila, Jakarta and Mumbai.
But by 1:40 p.m. in Hong Kong, Australian stocks had staged a record intraday swing to trade up 4.4%, India was in the green and Thailand had pared a plunge of 13% to gain 1%.
The MSCI Asia Pacific Index gauge trimmed its loss to 1.7% after sinking as much as 6.7%. Moxy Ying and Abhishek Vishnoi reported on Bloomberg.
“People are probably thinking there will be some kind of policy measures to support markets,” on top of ones already announced, said Tomoichiro Kubota, a senior market analyst at Matsui Securities. “We could see a huge rebound in the short term given how much the market has fallen. But it doesn’t feel like the mid-term downward trend will change. The market will continue to trade in high volatility.”
Friday’s trading was particularly volatile, underscoring investors’ lack of confidence over governments’ measures to counter the coronavirus outbreak, with deaths approaching 5,000 globally.
New York City has declared a state of emergency, France is closing all schools, and the Philippines has placed 12 million people in the Manila area on lockdown.
Traders cited multiple reasons for the sudden bounce, from simple bargain hunting, to short covering, hopes for more stimulus and a potentially vaccine being developed by a Canadian company to cure the virus.
“The virus spread has far outpaced the typical reaction time by governments in devising new policies to deal with a largely unprecedented economic and social event,” said Tai Hui, the chief Asia market strategist at JPMorgan Asset Management in Hong Kong. “Government bureaucracy simply has not kept pace with the nature of the outbreak and market expectations.”
Central banks globally have been providing liquidity to calm wild swings in financial markets. In the latest developments, the Bank of Japan will probably expand its stimulus at a meeting next week, people familiar with the matter have said, while India’s central bank pledged to use its record $481 billion foreign-currency arsenal to stem a market rout. The Bank of Korea is also considering an emergency board meeting and will take steps to stem excessive foreign exchange movements.
“The equity markets have by now priced in at least a technical recession lasting two quarters,” said Eli Lee, head of investment strategy at Bank of Singapore. “The larger question is whether we could see a longer fundamental recession.”
— With assistance by Min Jeong Lee