Asian Investors Turn Cautious as China Cuts Lending Rate, Japan Exports Slump

The major Asia-Pacific stock indexes finished mixed, but mostly higher on Monday as caution gripped share markets amid expectations a busy week of corporate earnings and economic data will drive home the damage done by the global virus lockdowns, while a glut of supply sent U.S. crude spiraling to 20-year lows. Traders also reacted to a cut in the prime rate in China and a plunge in Japanese exports.

On Monday, Japan’s Nikkei 225 Index settled at 19669.12, down 228.14 or -1.15%. South Korea’s KOSPI Index finished at 1898.36, down 16.17 or -0.84% and Hong Kong’s Hang Seng Index closed at 24330.02, down 49.98 or -0.21%.

China’s Shanghai Index settled at 2852.55, up 14.06 or +0.50%. Australia’s S&P/ASX 200 Index finished at 5353.00, down 134.50 or -2.45%.

China Lowers Benchmark Lending Rate to Shore Up Coronavirus-hit Chinese Economy

China stocks ended higher on Monday as a key Chinese lending rate was cut for the second time this year to shore up the coronavirus-hit economy.

China cut its benchmark lending rate as expected to reduce borrowing costs for companies and prop up the economy, after it contracted for the first time in decades.

The one-year loan prime rate (LPR) was lowered by 20 basis points (bps) to 3.85% from 4.05% previously, while the five-year LPR was cut by half as much to 4.65% from 4.75%.

Most new and outstanding loans are based on the LPR, while the five-year rate influences the pricing of mortgages. The LPR is a lending reference rate set monthly by 18 banks.

The asymmetric cut suggests that authorities will stick to the tight housing policy. It will not be deemed as a tool to stimulate domestic demand, even at this difficult time,” said Xing Zhaopeng, markets economist at ANZ in Shanghai.

China has plenty of room to make moves in its macroeconomic policy to cushion against the impact of the coronavirus, officials at the National Development and Reform Commission said.

Japan Exports Slump as Coronavirus Hits U.S., Chinese Demand

Japan’s exports slumped the most in nearly four years in March as U.S.-bound shipments, including cars, fell at the fastest rate since 2011, highlighting the damage the coronavirus pandemic has inflicted on global trade.

Adding to worries the world’s third-largest economy is sliding into recession, Ministry of Finance data showed Japanese exports fell 11.7% in the year to March, compared with a 10.1% decrease expected by economists in a Reuters poll.

That followed a 1% fall in February and marked the biggest decline since July 2016, as shipments to Japan’s major export destinations from China, the United States to Europe were all battered.

“The impact is likely to continue in April and onwards, which will prevent economic activity from normalizing,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “That will keep trade volume constricted globally.”

Exports to China, Japan’s largest trading partner, fell 8.7% in the year to March. U.S.-bound shipments, another key market for Japanese goods such as cars and electronics, fell 16.5% year-on-year in March, the biggest decline since April 2011.