Asian Shares Sharply Lower while Aussie Market Posts Record Rebound Rally

The major Asia-Pacific stock indexes whipsawed throughout Friday’s session with most finishing lower, the exception being the Australian benchmark. Investors primarily followed the blueprint laid out by Wall Street the previous session, when fears over the global coronavirus outbreak weighed on investor sentiment enough to fuel a historic drop.

On the bearish side, Japan’s benchmark Nikkei 225 index plunged 10% during the trading session and is now more than 20% off its 52-week closing high, putting it deeper into bear market territory.

On the bullish side, Australian shares recovered from earlier losses and posted a dramatic rebound to finish higher after dropping as much as 8% on an intraday basis. Nonetheless, its benchmark S&P/ASX 200 Index is still off more than 20% from its 52-week closing higher, putting it in bear market territory.

On Friday, Japan’s Nikkei 225 Index settled at 17431.05, down 1128.58 or -6.08%. Hong Kong’s Hang Seng Index finished at 24032.91, down 276.16 or -1.14% and South Korea’s KOSPI Index closed at 1771.44, down 62.89 or -3.43%.

In China, the Shanghai Index settled at 2887.43, down 36.06 or -1.23% and Australia’s S&P/ASX 200 Index finished at 5539.30, up 234.70 or +4.42%.

Australian Shares Post Largest Market Turnaround on Record

Australian stocks staged a dramatic recovery in late trade on Friday, recovering earlier losses of more than 8 percent to close up more than 4 percent.

Having tumbled to 4873.70 in early trade, hitting the lowest level since early 2016 and extending the losses from the record high hit less than a month ago to more than 30 percent, the index staged a remarkable recovery into the close, gaining more than 10 percent in the space of 90 minutes.

Lack of Confidence in Governments’ Response to Coronavirus at the Forefront

“The world’s financial system has become dislocated,” Kim Mundy, currency strategist at Commonwealth Bank of Australia, wrote in a note. “Underlying the big moves is a lack of confidence governments have the right plan to contain the health and economic impacts of the coronavirus.”

Government Bureaucracy Slows Response

“While investors are looking for immediate remedies from governments and central banks, the virus spread has far outpaced the typical reaction time by governments in devising new policies to deal with a largely unprecedented economic and social event,” J.P. Morgan Asset Management’s Tai Hui wrote in a note. “Government bureaucracy simply has not kept pace with the nature of the outbreak and market expectations.”

Travel Bans Putting Pressure on Global Airline Stocks

Governments are starting to take steps to curb travel as they seek to contain the coronavirus outbreak. India is temporarily suspending almost all travel visas starting Friday.

“All existing visas, expect diplomatic, official, UN/International Organizations, employment, project visas, stand suspended till 15^th April 2020,” India’s health ministry said in a statement. The restrictions are due to come into effect from 12:00 GMT on March 13 as the port of departure.

“Indian nationals are strongly advised to avoid all non-essential travel abroad. On their return, they can be subjected to quarantine for a minimum of 14 days,” the ministry added.

On Wednesday, President Donald Trump imposed a travel ban on 26 European countries after the World Health Organization named the coronavirus a global pandemic. The U.S. imposed a travel ban on China in late January to try to reduce the coronavirus outbreak.

“To keep new cases from entering our shores, we will be suspending all travel from Europe to the United States from entering our shores, we will be suspending all travel from Europe to the United States,” Trump said Wednesday.

The European Union on Thursday firmly objected to the plan, noting that the EU “is taking strong action” against the pandemic.