Asia markets pare losses as China returns to work but sentiment jittery: STI down 0.6%

Pedestrians wearing masks reflected in a stock market indicator display board in Tokyo on Feb 3, 2020.
Pedestrians wearing masks reflected in a stock market indicator display board in Tokyo on Feb 3, 2020.PHOTO: EPA-EFE

SYDNEY (REUTERS, BLOOMBERG) - Asian shares pared early losses on Monday (Feb 10) as Chinese authorities lifted some coronavirus-related restrictions on work and travel, helping businesses resume work though overall sentiment was still jittery as the death toll from the epidemic climbed.

More than 900 people have so far died in China’s central Hubei province as of Sunday with most of the new deaths in the provincial capital of Wuhan, the epicentre of the outbreak.

To contain the spread, China’s government had ordered lockdowns, cancelled flights and shut schools in many cities. But on Monday, workers began trickling back to offices and factories though a large number of workplaces remain closed and many white-collar workers will continue to work from home.

Japan’s Nikkei was off 0.5 per cent, after earlier stumbling more than 0.8 per cent, while benchmarks in South Korea and Australia pared losses to trade down 0.7 per cent and 0.1 per cent respectively.

China’s Shanghai Composite Index which was earlier the only Asian benchmark  in the black, reversed course and was down 0.4 per cent. Hong Kong's Hang Seng index was off 0.8 per cent.

Singapore's Straits Times Index, which sank 1.3 per cent after the market opened, was down 17.72 points or 0.6 per cent at 3,163.76 by the midday break.

On Friday, Singapore raised its coronavirus alert level and reported more cases not linked to previous infections or travel to China.

“Markets have turned around a bit reflecting the news that Chinese businesses were returning to work,” said James McGlew, analyst at stockbroker Argonaut.

“Overall, I think, there is still a concern out there that the impact from the coronavirus hasn’t been fully quantified,” he added. “Today’s (easing of restrictions) seems to be more of a symbolic gesture rather than the government actually being on top of the situation with this virus.”

The outbreak has killed more people than the Sars epidemic did globally in 2002/2003. The virus has also spread to at least 27 countries and territories, infecting more than 330 people.

Worries about the hit to the world's second-largest economy has hurt investor risk appetite though confidence in China's ability to contain the epidemic has prevented sharp losses.

China's central bank has taken a raft of measures to support the economy, including reducing interest rates and flushing the market with liquidity. From Monday, it will provide special funds for banks to re-lend to businesses working to combat the virus.

Monday’s losses in Asia extended from Wall Street on Friday where the Dow fell 0.9 per cent, the S&P 500 declined 0.5 per cent while the Nasdaq dropped 0.5 per cent. E-mini futures for S&P 500 reversed early losses on Monday to be up 0.1 per cent.

“Expect markets to be sensitive to virus headlines. In this environment, we favour defensive positioning,” ANZ economists wrote in a note.

China’s central bank has taken a raft of measures to support the economy, including reducing interest rates and flushing the market with liquidity. From Monday, it will provide special funds for banks to re-lend to businesses working to combat the virus.

Despite the measures, analysts expect the world economy to take a hit from an expected slowdown in China.

“For now, our best guess is that the economic disruption related to the coronavirus will cost the world economy over US$280 billion in the first quarter of this year,” Capital Economics said in a note on Friday.

“If we’re right, then this will mean that global (economic output) will not grow in quarter on quarter terms for the first time since 2009.”

The dollar reversed losses against the yen to be up 0.1 per cent at 109.84.

The Australian dollar, considered a liquid proxy for China plays, also jumped 0.5 per cent to US$0.6706 after briefly hitting an 11-year low of US$0.6679. It fell 0.2 per cent last week to clock its six straight weekly loss.

That left the dollar index flat at 98.647.

In commodities, brent crude futures gave up losses to be up 17 cents at US$54.64 a barrel while US crude futures added 8 cents to US$50.4 a barrel.

Since Jan 17, oil prices have fallen by 14 per cent while copper has is down around 10 per cent.

US gold futures were flat at US$1,573.3 an ounce.