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Nikkei Markets

Asian stocks edge higher as China takes more supportive measures

Guangzhou Automobile surges 7.7% despite coronavirus turmoil

HONG KONG (Nikkei Markets) -- Asian shares outside of Japan edged higher on Monday after China lowered interest rates on one-year loans and pledged more steps to support the economy reeling under the coronavirus outbreak.

The Nikkei Asia300 index of companies outside Japan rose 0.1% to 1,382.34. Weak growth reports from Japan and Thailand capped the advance in the stocks.

On Monday, China's central bank took one more step to help businesses endure the impact of the coronavirus. The People's Bank of China said it will lower by 10 basis points the rate on 200 billion-yuan ($29 billion) of one-year medium-term lending facility (MLF). The cut in MLF comes after the central bank earlier this month reduced the seven-day and 14-day reverse repo rates by 10 basis points.

"Today's MLF cut makes it even more likely that the Loan Prime Rate (LPR), set by bank quotations which are in turn determined by a spread over the MLF rate, will decline when it is published on Wednesday," Capital Economics said in a note. "Looking ahead, we think the PBOC still has more work to do. A 10 basis-point decline in the MLF rate and LPR won't be enough to drive a turnaround in credit growth, especially given the hit to investment appetite from the coronavirus outbreak."

Other central banks in Asia have joined the PBOC in taking measures to contain the effects of the epidemic. Meanwhile, there were signs that Asian economies were already struggling prior to the hit from the coronavirus.

Japan on Monday reported that its economy contracted by a quarter-on-quarter, annualized pace of 6.3% in the October-December period, worse than the 3.7% decline expected by economists polled by Reuters. Thailand said its gross domestic product grew by 1.6% year-on-year in the December quarter compared with the 2.1% expected.

Singapore cut its growth outlook, saying it expects the GDP expansion to come in between minus 0.5% and plus 1.5%, down from an earlier forecast of 0.5% to 2.5% growth.

In movers on the A300 gauge on Monday, heavyweights Taiwan Semiconductor Manufacturing declined 1% while Tencent Holdings added 0.4%.

Guangzhou Automobile Group led Chinese carmakers higher, adding 7.7%. That was despite China's top auto industry telling Reuters on Friday that the nation's auto sales will drop more than 10% in the first half of this year on account of the coronavirus.

Air China advanced 2.2% despite reporting that its January passengers declined 4.1% on-year to 9.2 million while passenger load factor decreased 3.3% to 76.6%. Singapore Airlines added 0.5% after reporting that third-quarter net profit increased 10.9% on-year.

ComfortDelGro fell 4.1% after the Singaporean transport company said net profit for 2019 declined about 13%. Oil and Natural Gas dropped 3.2% to multiyear lows after the Indian energy explorer said December quarter net profit halved from a year earlier. 

--Nimesh Vora

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