China stocks rise as Beijing adds support, STI rebounds 1.2%

A pedestrian wearing a face mask walks past a stock indicator displaying share prices of the Tokyo Stock Exchange in Tokyo on Feb 3, 2020. PHOTO: AFP

SYDNEY (BLOOMBERG, REUTERS) - China's stocks recouped a slide of more than 2 per cent minutes after opening trading on Tuesday (Feb 4), lifting markets across Asia, as Beijing added support with more cash and a strong yuan fix.

China earlier on Tuesday set the daily yuan fixing at stronger than 7 per US dollar, a sign of support, though it continued to trade weaker than that level offshore.

The People's Bank of China also injected a net 400 billion yuan (S$76.3 billion) into the banking system with reverse repurchase agreements on Tuesday, marking the largest single-day addition since January 2019. The PBOC had supplied 1.2 trillion yuan of liquidity on Monday, with the figure coming to 150 billion yuan on a net basis.

The measures so far "are just the beginning of monetary and credit easing," Nomura Holdings Inc. analysts wrote in a note, adding that the central bank will probably pump in medium-term cash and cut lenders' reserve requirement ratio to bolster growth.

Analysts are anticipating more measures to support economic growth as the hit to the country mounts. In the latest tally, China said its total death toll from the virus stood at 425 and cases rose to more than 20,000.

The Shanghai Composite Index rose 0.6 per cent in choppy trading after dropping as much as 2.2 per cent when the market opened on Tuesday after Monday's 8 per cent rout.

Japan's Nikkei pared opening losses to rise 0.2 per cent while Hong Kong's Hang seng index rebounded 0.9 per cent. South Korea shares jumped 1.5 per cent while Australia stocks rose 0.4 per cent.

Singapore's Straits Times Index opened higher, rising 24.64 points or 0.8 per cent to 3,140.95. It climbed higher to to 3,153.65, up 37.34 points or 1.2 per cent, at 9:57am.

Brent crude futures crashed to US$54.11 a barrel, bringing losses for the year so far to 18 per cent, while US crude sank to US$49.99.

China's central bank has flooded the economy with cash while trimming some key lending rates, but analysts suspect more will have to be done to offset the economic fallout from the virus.

"Given the extent of the shutdowns in China as well as the rapid rise in the virus that is likely to continue through March or April, a significant hit to China and regional growth is very likely," said JPMorgan economist Joseph Lupton.

"We would assume that in addition to bridging any funding stresses, fiscal policies will need to be ramped up to support growth once the contagion gets under control."

Shanghai blue chips slid almost 8 per cent on Monday as markets resumed from the Lunar New Year holiday.

A swath of commodities from copper to iron ore joined oil in the dumpster amid fears the drag on Chinese industry and travel would sharply curb demand for fuel and resources.

E-Mini futures for the S&P 500 were flat after results from Alphabet Inc disappointed, though that followed a 0.7 per cent bounce overnight.

Wall Street had taken comfort in a surprisingly solid reading of US manufacturing and the Dow ended Monday with a rise of 0.51 per cent, while the S&P 500 gained 0.73 per cent and the Nasdaq 1.34 per cent.

Factory activity rebounded in January after contracting for five straight months amid a surge in new orders.

The ISM index rose to 50.9, the highest since July, from an upwardly revised 47.8, though the survey was taken before the virus spread in earnest.

The upbeat report nudged Treasury yields up from deep lows and gave the US dollar a modest lift.

The US dollar firmed to 108.68 yen, from an overnight low of 108.30, while the euro faded a fraction to US$1.1059 but remained well within recent snug ranges.

Against a basket of currencies, the dollar bounced back to 97.837 from a trough of 97.406.

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The pound was nursing a grudge at US$1.2990 having shed 1.6 per cent overnight when the UK government laid out a tough opening stance for future trade talks with the European Union following its departure from the bloc last week.

The fall erased all the gains made after the Bank of England's decision last week to keep interest rates on hold.

Spot gold was off at US$1,577.48 per ounce, from a top of US$1.591.46, as the dollar firmed and safe haven demand waned a little.

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