SINGAPORE: Singapore’s stock market rebounded along with its peers in Asia on Tuesday (Mar 24) as a pledge by the US Federal Reserve to spend whatever it takes to stabilise the financial system lifted sentiment amid the COVID-19 outbreak.
Policymakers across the globe are looking to stave off a deep economic freeze from lockdowns and travel bans through a slew of monetary and fiscal policy measures.
Traders gave a massive thumbs up to the US central bank’s pledge to essentially print cash in a move not seen since the global financial crisis more than a decade ago.
The Fed, which has already slashed interest rates to record lows, said it will buy unlimited amounts of Treasury debt and take steps to lend directly to small- and medium-sized firms hammered by restrictions across the country.
The plan failed to inspire US traders, with all three main indexes on Wall Street sliding, but equities in Asia rallied.
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The Singapore Straits Times index rose 6.2 per cent to close at 2,372.12, with 372 winners against 139 losers.
Among the gainers was Singapore Airlines, which closed nearly 10 per cent up at S$5.89. The counter, which as taken a beating in recent weeks, has lost nearly 35 per cent this year.
Singtel rose 8.3 per cent to S$2.47 and DBS gained 7.9 per cent to close at S$18.21.
Airlines across the world have been badly hit in recent months, following travel restrictions put into place by many countries to stop the spread of the COVID-19 outbreak.
Singapore Airlines on Monday said that it will cut capacity by 96 per cent, ground almost its entire fleet and impose cost cuts affecting about 10,000 employees.
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The Nikkei, which jumped 7 per cent, was given an extra lift by a Bank of Japan decision to embark on its own massive bond-buying scheme.
Seoul rose more than 8 per cent, while Hong Kong, Sydney and Taipei each rose more than 4 per cent. Shanghai and Mumbai added 2 per cent.
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K2 Asset Management head of research George Boubouras said despite gains on Tuesday in Asian equities, financial market sentiment remained fragile even as the co-ordinated stimulus measures were implemented around the world.
“The biggest trigger for positive sentiment in these markets will be a flattening of the trajectory for the virus,” he told Reuters by phone from Melbourne.
“Economies around the world are going offline and that is devastating for economic activity, it’s creating the most robust dislocation in financial markets in living memory.”
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Central banks and governments, he said, needed to implement “bold and innovative” monetary and fiscal policies to stave off the prospect of a damaging credit crunch hitting global financial systems.
“It is not a credit crunch yet and it liquidity measures are critical to stopping that,” he said.
Macquarie Wealth Management divisional director Martin Lakos said the speed of the equity market decline made the current sell-off arguably worse then the 2008 global financial crisis.
“The falls that we have seen have been breathtaking, and it is the speed of those declines that have caught people by surprise,” he said.
“If the number of cases start to stabilise, and that gives investors confidence then we could start to see them revert to fundamentals. Markets are not trading on fundamentals right now.”
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With an expected flood of dollars into financial markets, the greenback suffered a rare sell-off, having surged for the past few weeks.
It lost almost 4 per cent against the Australian dollar, 3 per cent against the New Zealand dollar and more than 1 per cent to the South Korean won, Russian ruble and Turkish lira.
It was also lower against its major peers, with the euro up more than 1 per cent.
The weaker dollar also helped lift crude, which has been hammered to multi-year lows by a crash in demand owing to the global lockdown as well as a price war between producers Saudi Arabia and Russia.
Edward Moya at OANDA warned that prices would likely fall again as global lockdown efforts hammer demand.
“Oil is only rallying because the Fed’s unprecedented measures finally stopped the stronger dollar,” he said.
“Crude prices will have wild swings, but no one is expecting the bottom to be already in place.”