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Nikkei Markets

Asian stocks recover on hopes of central bank support

Samsung and Amorepacific advance despite jump in South Korean coronavirus cases

HONG KONG (Nikkei Markets) -- Asian shares outside Japan advanced on Tuesday as investors bet that central banks would help battle the rising threat to economic growth from the new coronavirus.

The Nikkei Asia300 index of companies outside Japan rose 0.5% to 1,324.12.

South Korea reported 60 new cases of the virus on Tuesday, bringing the total to about 900, while the number of infections in Italy stood at around 230. Investors shifted their focus to these two countries after both reported a jump in new infections, prompting fears of a pandemic.

In response to the growing threat, South Korea's central bank is expected to ease interest rates on Thursday.

"It looks almost certain that the Bank of Korea will cut its main policy rate by another 25 basis points to 1%," Capital Economics said in a note. "Previously, we had expected the coronavirus to primarily affect Korea via its links with China's economy. But the jump in cases means that the economic impact is now likely to be felt much more broadly. We recently lowered our GDP growth forecast for 2020 from 2.5% to 1%. The risks to our forecast are now skewed to the downside," it said.

If South Korea cuts rates on Thursday, it will join a host of Asian central banks that have eased their monetary policy amid the raging virus.

In addition to Asian central banks, traders now expect policy support from the Federal Reserve. According to the CME FedWatch Tool, there is now a 45% chance that the U.S. central bank would cut rates by at least a quarter percentage point at the April meeting. The odds of a rate cut at the June meeting have climbed to 70%.

Movers on Tuesday's Asia300 included Samsung Electronics advance of 1.9% after tumbling 4.1% in the previous session. Cosmetic conglomerate Amorepacific Group climbed 3.6% after falling to a more-than-four-month low yesterday.

Among losers, Bank of China led mainland lenders lower, slipping 0.6%. CNOOC paced losses among energy names, falling 1.5% after Brent crude tumbled about 4% yesterday.

Singapore Airlines slipped 0.2%. The carrier and its regional unit SilkAir canceled additional flights in response to weak demand due to the coronavirus. The move will result in a 7.1% decrease in scheduled capacity, measured in available seat-kilometers, from February to the end of May, the airline said in a Facebook post.

--Nimesh Vora

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