Asia Weekly Coronavirus Watch: Stimulus packages lining up in Asia over worries of a global economic collapse

• While the human cost of coronavirus mounted to over 2 million confirmed cases worldwide, the EU seems to have peaked and the US soon followed suit. However, the rapid rise in confirmed cases in India and Africa has fueled concerns about the spread in the emerging world. In Asia, the overall infection continued to slow down but more infections in Singapore, Japan and a minor – but still noticeable – spike in China point to the looming risks of a second wave of contagion.
• Against this background, mobility control has become stricter across Asia, with the exception of China. Overall, tightened social distance policies are weighing on domestic demand while exports are dragged by plummeting global trade. Falling exports in Taiwan and machine orders in Japan are early indicators of the collapse in external demand in Asia.
• With the end of lockdown in the Hubei province, China’s manufacturing sentiment continued to improve. In the same vein, daily housing transactions, steel factory utilization and car sales all climbed up, supporting the normalization of economic activity but still below the 2019 levels. Also, exports continued to decline but with a slower pace in March. On the other hand, the recovery in the social-related service sector remained stubbornly slow. Another worrying signal is the deflationary pressures in the Chinese economy, as both the CPI and PPI decelerated with the latter in negative territory. The positive side of a decelerating CPI is that it gives the PBoC more room to inject additional liquidity to the economy. March data on M2 and new bank loans point to monetary policy’ easing effectively pushing up lending.
• Global equity markets cheered up this week on the back of slower expansion of coronavirus. Within Asia, Vietnam and Thailand have seen the largest rebound in the equity market. In terms of the forex markets, Asian currencies generally strengthened against the greenback. 
• To combat the negative shock from coronavirus, some Asian economies announced renewed fiscal stimulus. Hong Kong unleashed a second fiscal package of HKD 137.5 billion (5% of GDP) with a focus on wage subsidies. This adds to the package announced in February of about 4% of GDP, which included a HKD 10.000 one-off payment to individuals but which has not yet been disbursed. Japan also launched a 108 trillion-yen emergency stimulus package (or 20% of GDP), comprising of aid relief to households and tax breaks. This package is by now bigger than the one Japan announced in 2008.
• In ASEAN, Singapore announced a third stimulus package of SGD 5.1 billion (1% of GDP) to soften the economic damage of coronavirus, pushing the total three packages announced so far account for 12% of GDP. Malaysia also announced its MYR 10 billion the third stimulus package (0.6% of GDP), which features wage subsidies and special grants to small-and-medium enterprises in a bid to stave off the impact from national lockdown. The sum of the three packages so far equate to 6% for Malaysia GDP.

Full report available for NATIXIS clients.