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Markets

Asian shares tumble as surging dollar negates stimulus measures

South Korean shares fall sharply as more coronavirus infections emerge

A dealing room of a bank in Seoul. Shares across much of Asia suffered in morning trade on March 19 as the coronavirus pandemic continued to spook investors.   © Reuters

HONG KONG -- Asian shares fell across the board on Thursday as investor concerns over the deepening coronavirus pandemic and a strengthening dollar outweighed a slew of new stimulus measures.

Japanese shares gave up early gains to fall 1% while the yen, often considered a haven during times of market stress, slipped 0.5% against the dollar, underscoring the surging demand for the greenback.

The dollar index, which measures the value of the United States dollar relative to a basket of foreign currencies, has gained in six of the last seven sessions and was marginally down in afternoon trade in Asia.

"The impact on emerging markets has been quite pronounced as global fund managers have sold out of stocks in these markets," said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd.

"Asian markets are oversold but valuations don't matter till confidence returns," he said. "Till then foreign funds will sell whatever they can and rush to the dollar."

South Korea's Kospi slumped 8.4% as the nation confirmed 152 more coronavirus cases, raising the total number to 8,565 with 91 deaths.

"The U.S. dollar is super strong in the market," Jeon Seung-ji, an analyst at Samsung Futures said. "Foreign investors buy dollars after selling stocks in the Korean market. Insurers also buy dollars to pay back their bonds issued overseas markets."

The dollar stampede comes despite attempts by authorities to provide liquidity through swaps, repurchase operations and emergency rate cuts. Six central banks have also promised to discount dollars to banks to ease a squeeze in dollar funding

The Philippine Stock Exchange index plunged 12.4% as soon as it reopened after a two-day closure due to the lockdown of Luzon, triggering a circuit breaker. The Indonesia Stock Exchange halted trading for 30 minutes this morning after its index dropped 5%.

Elsewhere in Asia, Hong Kong's Hang Seng Index slipped 2.5%, the Shanghai Composite was 1.1% lower, Singapore's Strait Times dropped 4.8% and Australia's ASX/200 fell 3.4%. The S&P 500 futures was 1.5% lower.

The euro was the only currency to hold its ground against the dollar after the European Central Bank announced a temporary asset purchase program to buy public and private sector securities, worth 750 billion euros ($820 billion) until at least the end of 2020.

"Extraordinary times require extraordinary action," Christine Lagarde, president of the ECB said in a statement. "There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate."

The ECB's salvo follows stimulus efforts from governments and central banks around the world, including the U.S. Federal Reserve and Bank of Japan, to limit shocks to their economies from a virus that has infected more than 200,000 people globally and left more than 8,700 dead.

The U.S. Senate has cleared a second major bill responding to the pandemic, and White House economic adviser Larry Kudlow has signaled that the government might take equity positions as part of corporate rescues.

Australia's central bank cut its cash rate for the second time this week and said it will target three-year government bond yields to support an economy spiralling toward its first recession in almost 30 years.

As the virus outbreak deepened, authorities have responded by shutting borders and locking down cities, threatening jobs and business supply chains.

While measures to combat the spread of virus have been substantial, investors have continued to be apprehensive as the health crisis shows little signs of peaking, leading to wild gyrations across asset classes.

More than $17 trillion has been wiped off share prices since mid-January, with markets across the globe falling over 20% from their recent highs, ending an 11-year bull run, the longest on record.

Oil climbed 14% on Thursday, rising from an 18-year low as it lost a quarter of its value on Wednesday. Gold, which has been heavily sold the past week, rose 0.8%.

U.S. 10-year bond yields were flat. Bonds have suffered their sharpest two-day sell-off in nearly 20 years due to investor concerns over the cost of the massive fiscal stimulus.

Additional reporting by Kim Jaewon.

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