Coronavirus News Asia

Investors worry about second wave of infections

HONG KONG: Investors dumped risky assets amid fears an emerging second round of coronavirus infections was about to risk the nascent rebound in the global economy.

The worries emerged even as US Treasury Secretary Steven Mnuchin said the US economy would stay open even during a second wave of the virus, while noting that “you’re going to create more damage”.

But analysts said the sell-off was expected to be short-lived as the resurgence in the pandemic was unlikely to be as devastating.

“With economies around the world progressively re-opening, the rising odds that the second wave of infections will not be as deadly as the first one, and the bulked-up fiscal stimulus around the world, easy monetary policy should add a supplementary tonic to the recovery,” macro research firm BCA Research said in a note.

“Already, interest-sensitive economic variables, such as mortgage applications for purchases are bouncing smartly. Moreover, consumer and business confidence are also rebounding. An economic recovery will support the earnings outlook, and thus, stock prices.”

Most indexes down

Japan’s Nikkei index tumbled 0.75%, Australia’s S&P/ASX benchmark retreated 1.89% and Hong Kong’s Hang Seng index ended 0.73% lower. China’s mainland benchmark the CSI300 bucked the trend and edged up 0.18%. Regionally the MSCI Asia Pacific index fell 1.4%.

Oil prices tumbled as investors worried about falling energy demand. West Texas Intermediate crude declined 1.3% and Brent crude slid 2.5%.

Australia underperformed the region as its diplomatic spat with China intensified. Chinese foreign ministry spokeswoman Hua Chunying struck back with fresh warnings on travelling and studying Down Under, after Australian Prime Minister Scott Morrison criticised Beijing’s earlier warning about racist attacks on Asians. Canberra angered Beijing initially by calling for an independent inquiry into the origin of the coronavirus, which was first detected in the Chinese city of Wuhan.

Credit markets continue to ease as markets digest the recent spate of issuance with the Asia IG index wider by 3 basis point at 91/93 bps. Sovereign CDS was 2-12bps wider. Still, Wynn Macau issued price guidance for 144A/Reg S bonds due to price today.

In the week ahead, industrial production and retail sales data for the US and China will drive investor sentiment as markets look for manufacturing and consumer trends in the world’s two largest economies.

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