Coronavirus News Asia

Markets retreat as second wave threatens recovery

Hong Kong: Financial markets were spooked by a resurgence of coronavirus infections in Beijing and elsewhere, despite economies beginning to reopen. Initial data for May showed signs of a recovery albeit weak.

China, where the coronavirus was first detected last year, reported a fresh emergence of infections over the weekend. The country was thought to have largely brought the deadly epidemic under control.

In the United States, which leads the global count in infections, there has been a further spread of cases in over 20 cities, so the country’s overall tally now exceeds 2 million.

These reports deterred investors. The Japanese Nikkei 225 index tumbled 3.47% and Australia’s S&P/ASX 200 dropped 2.19%. Hong Kong’s HIS benchmark retreated 2.16% and mainland China’s CSI 300 index dropped 1.2%.

‘Elevated uncertainty’

“Equities are likely to churn for the coming quarter or two. They need to digest their outstanding gains from their March 23 bottom as we are entering a period of elevated political uncertainty with the US election in November,” BCA Research said in a note published on Monday. “Moreover, the fears linked to the high likelihood of a second wave of infection will likely contribute to the whipsaws in stock prices over the summer.”

But analysts say there has been limited economic disruption despite numerous regional outbreaks in recent months, as they were quickly contained with localised lockdowns.

“Infrastructure spending should continue to accelerate in the months ahead and push up growth in investment and industrial output. Services and consumption should benefit, too, as the construction boom will drive a rebound in high-paying migrant jobs,” Capital Economics said in a note published after China reported its economy was not shrinking anymore.

Data released on Monday showed that industrial production grew by 4.4% in May, while fixed asset investment rose by 3.9% and retail sales dropped by 2.8% year-on-year.  

With low rates expected to stay for a while, bond issuers are swarming to primary markets even though credit spreads widened. The Asia IG index was 2 basis points wider at 93/94. PLDT, China Construction Bank, Industrial Bank of Korea, China Gold, Ping An Real Estate have joined China Huadian, Castle Peak Power Finance, Chailease Holding, and Guangdong Hengjian with bond issuance plans.

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