Asian stocks slump as recovery fears grow

Stock markets across Asia's emerging economies sank on Thursday as concerns about rising coronavirus cases in the developed world hammered investors' risk appetite, driving capital into the dollar and other traditional safe havens.

With the tone set by a drop on Wall Street overnight, Singapore's Strait Times index was also caught up in the action, losing almost 1pc as early falls in China sparked losses of as much as 2.5pc across the region.

India, South Korea and Taiwan, among the strongest performers in recent weeks thanks to their appeal to technology investors, were the worst hit, falling 1.9pc, 2.6pc and 2.5pc, respectively.

In Indonesia, hit by concerns over rising domestic COVID-19 cases and moves to involve the central bank in fiscal stimulus, stocks hit a two-week low and the rupiah fell for a third session.

Malaysia's ringgit eased 0.3pc, bringing its decline for the week so far to about 1.3pc after opposition leader Anwar Ibrahim's claimed that he had a majority to oust the current government.

That stoked uncertainities about a drawn out power struggle and the possibility of an early election and threatened to stall vital stimulus for the economy.

Prime Minister Muhyiddin Yassin, whose seven-month old coalition government has survived with a wafer-thin majority, unveiled an additional economic package worth 10 billion ringgit ($2.40 billion) on Wednesday as Anwar made his pitch.

"Political uncertainty is a near-term risk for implementation of those (stimulus) policies or projects and hence the speed of economic recovery," analysts at China-based trading firm CGS-CIMB said in a note.

Despite a dour outlook for global economy, analysts sounded slightly upbeat on Asian emerging currencies' performance in the near-term.

"Asian FX have been much more resilient relatively to say, other emerging Latin American currencies and that's because China's broadening of economic recovery has anchored them," said Sim Moh Siong, forex strategist at Bank of Singapore.

However, he said the risk will increase if coronavirus cases escalate to the point that they overwhelm the healthcare system in Asia and currencies in this case "will be punished."

Thailand's baht fell 0.4pc to hit a two-month low, a day after an uneventful central bank meeting where rates were held steady and no stimulus was announced for a country in dire need for fiscal support.