Asian Shares Fall Despite Central Bank Measures

Asian stocks fell sharply on Monday despite emergency rate cuts by the U.S. Federal Reserve and the Reserve Bank of New Zealand and a fresh round of liquidity injections in China. Weak economic data from China added to investor worries about the impact of the coronavirus.

Chinese stocks fell after the release of dismal industrial data. The benchmark Shanghai Composite Index tumbled 98.17 points, or 3.4 percent, to 2,789.25, while Hong Kong’s Hang Seng Index slumped 969.34 points, or 4 percent, to 23,063.57.

China’s central bank added more funds into the banking system today but kept its borrowing cost unchanged after the U.S. Federal Reserve unexpectedly reduced interest rates by a steep 100 basis points.

The central bank last week had reduced the reserve requirement ratio by 50-100 basis points for qualifying banks to shore up the economy hit by the outbreak of covid-19.

In economic news, official data showed that Chinese industrial production and retail sales plunged more than expected at the start of the year amid a widespread shutdown of manufacturing operations.

Industrial production plunged 13.5 percent in the January to February period after rising 6.9 percent in December, the National Bureau of Statistics said. Economists had forecast a moderate 3 percent decrease.

Retail sales logged a sharp fall of 20.5 percent, reversing an 8 percent increase in December. Sales were forecast to drop only 4 percent.

Fixed asset investment was down 24.5 percent versus a 5.4 percent rise in January to December 2019. The jobless rate surged to 6.2 percent.

Home sales decreased 34.7 percent annually in the first two months of 2020, while property investment fell 16.3 percent after rising 9.9 percent in January to December 2019.

Japanese shares fluctuated before finishing lower despite the Bank of Japan announcing emergency monetary policy measures and core machinery orders data, an indicator of capital spending in the coming six to nine months, pointing to a rebound.

The total value of core machine orders in Japan climbed a seasonally adjusted 2.9 percent sequentially in January, the Cabinet Office said, coming in at 839.4 billion yen. That exceeded expectations for a decline of 1.0 percent following the upwardly revised 11.9 percent decline in December (originally -12.5 percent).

On a yearly basis, core machine orders eased 0.3 percent – again beating forecasts for a drop of 1.1 percent following the 3.5 percent decline in the previous month.

The Nikkei 225 Index tumbled 429.01 points, or 2.5 percent, to 17,002.04, while the broader Topix closed 2 percent lower at 1,236.34.

Australian markets extended their sell-off into a fourth week and plunged deep into bear market territory despite the Reserve Bank of Australia pumping extra liquidity into the banking system to ensure businesses and households have access to credit amid the coronavirus outbreak.

The benchmark S&P/ASX 200 Index plummeted 537.30 points, or 9.7 percent, to 5,002.00, marking the biggest loss since the Black Monday crash in 1987. The broader All Ordinaries Index ended down 532.50 points, or 9.5 percent, at 5,058.20.

Energy stocks succumbed to heavy selling pressure, with Woodside Petroleum, Santos, Oil Search and Beach Energy falling 14-20 percent. The big four banks gave up 10-12 percent.

Miners heavyweights BHP, Fortescue Metals Group and Rio Tinto dropped 3-6 percent, while gold miner Evolution Mining plunged 11.4 percent, Newcrest lost 13.2 percent and Regis Resources declined 13 percent.

Hearing implants maker Cochlear plummeted 19 percent after withdrawing its earnings outlook.

South Korea’s Kospi dropped 56.58 points, or 3.2 percent, to 1,714.86 as the mainstay industries such as automobiles and steel faced a crisis for their first quarter performance.

New Zealand shares ended sharply lower, with tourism stocks plunging in the wake of new travel restrictions announced by the government. The benchmark S&P/NZX 50 Index plunged as much as 5 percent before ending the session down 349.92 points, or 3.6 percent, to 9,476.94.

Earlier in the day, the Reserve Bank of New Zealand joined the global easing race with a rate cut of 75 basis points to a record low 0.25 percent to offset the negative impact from the coronavirus.

U.S. stocks saw a late-day rally on Friday to end sharply higher after President Donald Trump declared the coronavirus outbreak a national emergency, a development that would free up as much as $50 billion in additional funding to combat the outbreak and allow officials to waive certain regulations to accelerate testing and care for coronavirus patients.

Markets also reacted positively to reports that a coronavirus test developed by Swiss drug giant Roche has been granted emergency use authorization by the FDA.

The Dow Jones Industrial Average soared 9.4 percent, while the tech-heavy Nasdaq Composite and the S&P 500 climbed around 9.3 percent each.

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