SYDNEY – Asian markets are set for another bumpy ride on Monday on fears about the hit to world growth from the rapid spread of coronavirus, with all eyes on China where trading resumes following the Lunar New Year break.
China recorded 350 deaths from the new virus with the first death out of the mainland reported on Sunday in the Philippines.
Looking to head off a panic, China’s central bank plans to inject 1.2 trillion yuan ($173.8 billion) of liquidity into the markets via reverse repo operations on Monday.
Beijing also said it would help firms that produce vital goods resume work as soon as possible, state broadcaster CCTV reported.
For Chris Weston, a Sydney-based strategist at broker Pepperston, “the big unknown” was how China’s financial markets respond to the show of force from the country’s central bank.
“The fact the China Securities Regulatory Commission has detailed they see the impact of the coronavirus as ‘short-lived’ is designed to instill confidence,” Weston said. “Whether the market feeds off this optimism is another thing given the spread of the virus is still in its exponential stage.”
Economists tempered their outlook for the world’s second-largest economy, as travel curbs and supply chains disruptions are likely to crimp Chinese growth.
Citi revised its full-year forecast for China’s GDP growth to 5.5 percent in 2020 from 5.8 percent. It also cut first-quarter growth expectations to 4.8 percent from six percent in the fourth quarter of 2019.
JPMorgan shaved its forecast for global growth by 0.3 percentage point for this quarter.
Monday’s decline in Asian equities follows a steep sell-off in global share markets, which, on Friday, posted their biggest weekly and monthly declines amid growing concerns about the economic impact of the coronavirus outbreak in China. (Reuters)
