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Asia makes early gains on China PMI rise

Asian stock markets
MSCI's broadest index of Asia-Pacific shares outside Japan rose to its highest in six weeks. File photo: AFP.

(ATF) Asian markets rose after a surprise jump in China’s official Purchasing Managers’ Index (PMI) which rose to 52 in March from 35.7 in February and following a strong finish at Wall Street overnight. 

Australia’s S&P ASX 200 is 1.97% higher, the Nikkei 225 is up 0.66% and the Hang Seng index climbed 1.6%. Regionally the MSCI Asia Pacific ex-Japan benchmark has advanced 1.2%

Still, financial markets are not convinced this is the end of the gloomy economic backdrop as exports will remain under pressure as western economies grapple with the coronavirus, which has now claimed 37,686 lives and infected over 785,000 people globally.

“This does not mean that output is now back to its pre-virus trend. Instead, it simply suggests that economic activity improved modestly relative to February’s dismal showing, but remains well below pre-virus levels,” Capital Economics analysts said in a report.

“A full recovery will take much longer given the deepening slump in foreign demand and the deterioration in the labour market – the employment components of the PMIs rose last month but still point to continued layoffs.”

The rebound in March was not likely to help reverse the impact of the dismal economic performance of the first two months of the year, therefore hurting quarterly data.

ANZ analysts said the coronavirus impact on the world’s second biggest economy will be reflected via two main channels – a decline in global demand for China’s exports as well as supply-side disruptions that hinder production in China.

“By assuming different levels of global growth contraction and disruption on China’s supply chain production, the negative impact on China’s GDP could vary from -0.6 to -2.3ppt. Correspondingly, China’s GDP in Q2 may range from -0.4% y/y to -2.1%,” ANZ said.

Overnight, Wall Street indexes rose for the fourth time in five sessions but global stocks are on track to post the worst quarter since the 2008 global financial crisis.

Although the Dow Jones Industrial Average climbed 3.19%, the S&P 500 added 3.35%, and the Nasdaq Composite rose 3.62%, the three benchmarks are still 20% below their recent peaks.

Umesh Desai

Umesh Desai is the Executive Editor at Asia Financial. Prior to this he spent over two decades with Reuters News as Asia Pacific Chief Correspondent in Hong Kong and Bureau Chief in Bombay. Before becoming a journalist Umesh was a credit ratings analyst with Moody's arm in India - ICRA. A chartered accountant by training, Umesh began his career as an equity analyst. His Twitter handle is @umesh_desai


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