Coronavirus outbreak

Markets pick up on hopes of more US economic stimulus

Australia led Asia's market rebound, rising 3.11 per cent yesterday after Monday's 7.33 per cent sell-off, while Singapore's STI jumped as much as 2.6 per cent before finishing up 1.8 per cent.
Australia led Asia's market rebound, rising 3.11 per cent yesterday after Monday's 7.33 per cent sell-off, while Singapore's STI jumped as much as 2.6 per cent before finishing up 1.8 per cent.PHOTO: EPA-EFE

Investors cheer signs of situation in China stabilising; bargain hunters send STI up 1.8%

Stock markets across Asia and Europe clawed back some ground yesterday from Monday's record-setting declines, following a sharp rebound in US futures on expectations of more economic stimulus and signs that the Covid-19 outbreak in China appear to be stabilising.

After suffering its sharpest one-day fall since the global financial crisis, the Straits Times Index (STI) jumped as much as 2.6 per cent yesterday before finishing up 1.8 per cent, as bargain hunters piled into oversold bank counters and defensive plays, including Singapore Press Holdings (SPH), for their attractive dividend yield.

Leading the rebound in Asia was Australia, which rose 3.11 per cent after Monday's 7.33 per cent sell-off, while Thailand edged up 1.22 per cent yesterday after losing 7.96 per cent the previous day.

Chinese markets were cheered by President Xi Jinping's first visit yesterday to Wuhan, the epicentre of China's coronavirus epidemic, since the crisis erupted in January - a sign that officials believe the outbreak is under control.

"That's a sign of confidence the situation in China is stabilising, even though the virus outbreak in the US and Europe is still in a flux," CMC Markets analyst Margaret Yang said.

Shenzhen rose 2.42 per cent while Shanghai was up 1.82 per cent.

Also helping investors' mood are a rebound in oil prices and news of United States President Donald Trump's plan to propose a payroll tax cut and "very substantial relief" for industries hit by the virus as the risks of a global recession rise.

Futures on the Dow Jones Industrial Average indicated an opening surge of more than 700 points yesterday after virus fears and an oil price war sparked a worldwide panic on Monday.

The Dow crashed more than 2000 points on Monday in its biggest point drop in history.

Even as the STI pulled back from the brink of a bear market, some traders are questioning if yesterday's rebound is a dead cat bounce, or a temporary but unsustainable rally, Ms Yang said.

Chinese markets were cheered by President Xi Jinping's first visit yesterday to Wuhan, the epicentre of China's coronavirus epidemic, since the crisis erupted in January - a sign that officials believe the outbreak is under control.

This is as the outbreak is expected to take an economic toll on the region, given its strong trade and production linkages with China.

Genting Singapore saw only a 1.37 per cent gain as travel bans continued to hammer the tourism sector. But the casino operator was among the most actively traded as "some investors see the virus situation stabilising in Asia and expect high rollers to return, while others don't expect much of an improvement", UOB Kay Hian trading representative Brandon Leu said.

Defensive blue chips were among the best performers .

SPH rallied 7.47 per cent to $1.87 after UOB Kay Hian analysts upgraded the media and property group to "buy", citing attractive valuations following broad market selloffs in recent weeks.

In a Monday report, they said: "At current share price levels, SPH provides an attractive dividend yield of 5.8 per cent with a growing base of recurring income from defensive assets - aged care and student accommodation - which are more resilient to economic downturns."

Singapore Exchange (SGX) shares jumped 6.37 per cent to $9.19, buoyed by expectations of better third-quarter earnings. "SGX is definitely a beneficiary of higher market volatility, as its derivatives and equities trading volume picked up a fair bit in recent weeks," Tayrona Financial's director of research Liu Jinshu said.

Bank counters DBS, OCBC Bank and United Overseas Bank rebounded as "their balance sheets are strong even if earnings were to soften due to lower net interest margins" owing to the Federal Reserve's emergency rate cut last week, Mr Liu said. "Investors are looking at dividend yields of about 5 per cent," he added.

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A version of this article appeared in the print edition of The Straits Times on March 11, 2020, with the headline 'Markets pick up on hopes of more US economic stimulus'. Print Edition | Subscribe