Market Close Apr 22

Asian market wrap: Investors shaken by poor earnings, volatile oil

Oil weakness spreads; Earnings guidance withdrawn; New investment-grade bond issues

Asian market wrap:Investors shaken by poor earnings, volatile oil
An Amazon delivery man, with a face mask, crosses a street on Park Avenue, which is nearly empty due to the coronavirus pandemic in New York City, recently. Photo: Tayfun Coskun / Anadolu Agency via AFP

(ATF) Hong Kong: Financial markets were off lows but investors remained nervous on Wednesday after the oil-induced collapse in equities, as the earnings season gave little by way of earnings visibility.

The Stoxx Europe 600 index was up 1% and S&P Futures were 1.2% higher.

West Texas Intermediate oil futures expiring in June fell 2.1% to $11.33 a barrel after its May contract fell deep into negative territory overnight. That weakness seeped into the Brent Futures, which fell to $17 a barrel, the lowest since 1999.

“Equity markets fell as oil prices dropped and earnings releases continue to show how difficult it is for businesses to give guidance on when and how smoothly the situation will improve,” Esty Dwek, Natixis' Head of Macro Strategy, said.

Mexican food chain Chipotle said it was withdrawing its earnings guidance given the uncertainty surrounding the pandemic, while technology giant IBM said it will reassess its position based on the clarity of the macroeconomic recovery at the end of the second quarter, after it withdrew its guidance. 

Meanwhile, governments and central banks across the world are enacting various stimulus measures and easing policy to alleviate the economic damage from the pandemic.

The US Senate passed a $484 billion stimulus bill to replenish the small business aid program as well as pay for coronavirus testing and fund hospitals. Mexico unveiled a $31-billion package and cut its benchmark rate by 50 basis points, while South Korea plans a third supplementary budget and a $32-billion fund to support its economy.

“The global economy is furiously weak, but politicians around the world are not seating idly by,” BCA Research economists wrote in a note.

“The flood of stimulus unleashed over the course of the past two months dwarves the fiscal easing that followed the GFC (in 2008-09). European governments are much more aggressive than they were 11 years ago, although France and Italy still lag well behind the US. Even Germany, a bastion of fiscal rectitude, has opened its purse nearly as much as the US.”

The global infections count now exceeds 2.5 million cases with more than 178,000 deaths, and the economic devastation continues to manifest itself in economic data and in the ongoing earnings season. Singapore extended its partial lockdown for four more weeks and announced further support measures worth $3.8 billion.

Also on Asia Times Financial:

Getting China's millions back to work

Tech focus sharpened as coronavirus shows fragility of industry 

China to launch National Blockchain Network on Friday

Downside risks

“The key incremental source of downside risks comes from the PM's warning that the pandemic will likely last 'more than a year'. As our global economic baseline hinges on the pandemic fading from around the middle of the year, a more prolonged battle with the virus will pose significant risks to the gradual recovery expected in the second half of the year,” BofA Securities analysts said in a note, which kept the Singapore GDP forecast unchanged at -5.7% but highlighted further downside risks.

Japan’s Nikkei 225 index eased 0.74% but the Australian S&P ASX 200 ended flat and the Hong Kong benchmark, the Hang Seng index, edged up 0.42%. China’s CSI 300 benchmark rose 0.82%.

Credit markets were also on the defensive although investment grade issuers are starting to make tentative plans for tapping the market. Xiaomi Corporation has received over $2 billion in orders for a 10-year dollar bond, while Xinhu Zhongbao’s two-year-11- month bond and Qingdao City Construction’s three-year Reg S dollar bond all will price later today. 

The Asian IG series 33 index is 6 wider at 124/128 bps with Indonesia being the under-performer, widening 15bps to 220/230 bps.

 

ATF China Bond 50 Index: Corporate Index showed highest increase.

Foreign Exchange: As oil debacle loses shock effect, dollar recedes 

Asia Stocks

· Japan’s Nikkei 225 eased 0.74%

· Australia’s S&P ASX 200 ended unchanged

· Hong Kong’s Hang Seng index rose 0.42%

· China’s CSI300 climbed 0.82%

· The MSCI Asia Pacific index added 0.78%.

Stock of the day 

CanSino Biologics rose as much as 8.7% after it filed for an offering of shares to be listed on the Sci-Tech Innovation Board of the Shanghai Stock Exchange. It is China's Nasdaq-style market where companies expect better valuations.