Japan leads Asia declines after GDP slide; Singapore stocks await Budget relief measures

Pedestrians walk in front of an electric quotation board showing stock prices for the Tokyo Stock Exchange in Tokyo on Jan 27, 2020. PHOTO: AFP

SYDNEY (BLOOMBERG) - Japanese stocks led Asian equities lower on Monday (Feb 17) after the country reported a much deeper economic contraction than expected before any hit from the coronavirus.

Japan's Nikkei index lost 0.9 per cent as of 10:28am in Tokyo, though bond yields and the yen showed little reaction to the worst nominal GDP performance since Prime Minister Shinzo Abe took office.

The virus's impact was also seen in Singapore, which on Monday lowered its growth forecasts for 2020, citing uncertainty over the length and severity of the outbreak. The country is expected to unveil a large stimulus package in its Budget on Tuesday to mitigate the hit from the epidemic.

In anticipation of the support measures, Singapore's Straits Times Index was trading flat, down just 0.99 point or 0.03 per cent to 3,219.04 as of 9:56am.

Hong Kong's Hang Seng retreated 0.2 per cent but the Shanghai Composite added 0.3 per cent after China provided medium-term funding to banks and cut the interest rate it charges for the money as officials seek to cushion the economy from the virus epidemic.

Australia's S&P/ASX 200 Index slipped 0.3 per cent while South Korea's Kospi index fell 0.3 per cent.

US futures were slightly higher, wioth futures on the S&P 500 up 0.1 per cent. The index rose 0.2 per cent on Friday.

On the epidemic front, China over the weekend unveiled plans for reducing corporate taxes and fees, and letting banks run up more non-performing loans. The head of a hospital in Wuhan, the city at the center of the outbreak, said a turning point has been reached and that new infections are declining, CCTV reported. Bloomberg Economics estimated China's economy has been running at just 40 per cent to 50 per cent capacity in the last week.

While investor sentiment improved the past two weeks amid optimism the outbreak may be nearing a peak, new cases outside of China are keeping traders on edge. The head of the International Monetary Fund praised China for its "very aggressive" measures to limit the impact of the disease. Hubei province on Monday reported almost 2,000 new cases and 100 additional deaths, while fatalities in Taiwan and France were reported over the weekend.

"If the Chinese economy does recover and you've added all this fiscal and monetary stimulus into it aswell, the situation could be that you have much stronger emerging-markets into the second half" of the year, Sunny Bangia, a fund manager at Antipodes Partners Ltd., told Bloomberg TV in Sydney. "A lot depends on how this virus gets contained and if it can morph into something more minor."

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