- Asian Banks to pump liquidity into the economy.
- PBOC to cut down its reserve requirement ratio to 100, pumping 550 billion Yuan. RBI, BOJ to follow suit.
- Market slowly resurfacing. Will the trend continue?
Coronavirus or COVID-19 has not only affected the health of the citizens but also the economy of their countries. More than 5000 have met their deaths due to this pandemic, while 132,000 cases have been diagnosed. Although, the numbers are still increasing exponentially.
The Coronavirus pandemic has caused volatility in the market as we converse. Stock market has taken a drastic plunge while the crypto market is bearish since last week.
Asian Central Banks made some aggressive decisions to combat the market liquidity as per a Bloomberg report.
“Asian central banks will have to be more aggressive in easing policy and cutting interest rates,” said Chua Hak Bin. He is a senior economist at Maybank Kim Eng Research Pte. in Singapore. “Conventional monetary policy may not be effective under this crisis of confidence and fear.”
Chua further urges the Asian banks to co-ordinate and formulate a program to curb an indiscriminate sell-off across markets and “put a floor to this senseless panic.”
How Asian Banks Plans to Combat Liquidity?
- The epicenter of Coronavirus, China has come forward with the most aggressive tactic against the novel virus. The People’s Bank of China has reduced their reserve requirement ratio to 100 basis points from 50. The reserve requirement ratio is the amount of funds a bank must have on hand each night. With the discount in the reserve requirement ratio, China plans to release 550 billion yuan in liquidity that amounts to $79 Billion.
- The Bank of Japan has sought a novel method of bond buying to combat the panic stricken markets. The bank plans to meetup with finance ministry and regulators and also bought 101.4 billion yen of exchange-traded funds.
- Reserve Bank of India will also add 250 billion rupees ($3.4 billion) with short-term repurchase operations as what FED plans to do.
- Indonesian Central Banks bought in total 15 trillion rupiah of government bonds to release the funds in the global markets.
- With all the funds injection, Bank of Korea has its own ways to pull economy on its feet. The Bank of Korea has plans to waive off the business loans.
Amongst all the Asian banks activity, even Australia has pledged its support by pumping A$8.8 billion ($5.5 billion) in the market.
A range of policy options must remain on the table for central banks, Chua said, “Otherwise this pandemic will turn into a financial and solvency crisis.”
Stock market Reacted Positively to this Combat –
As the news surfaced that several Governments, Democrats and Republicans have come forward with helping hands, the global market breathed a sigh of relief. The European stock markets traded slightly higher on Friday amidst the crisis.
- S&P 500 has its best day since 2008 as stocks rose by 9% and rallied higher this Friday.
- MSCI’s main European Index was up 2.7 per cent at the open, after plunging more than 20 per cent over the past week.
- Thailand’s stock market traded up 3.1 per cent after experiencing an almost meltdown with 10.6% plunge.
- Australia’s S&P/ASX200 had its wildest trading day on record, falling past 8 per cent before surging in the last minutes of trade to settle 4.4 per cent higher after the close.
Crypto Market also Resurfacing
March 13th seemed to be another “Black Friday” for the crypto industry as Bitcoin and almost all Altcoins dropped drastically.
Shocking of all was the drop of Bitcoin, as the BTC price slashed by 50% to that of last month. Bitcoin supporters could not believe that their beloved crypto, which was trading above $10K last month was trading below $5K. However, the crypto saw gradual rise as the global market started gaining colour.
As of now, most of the cryptos are in the green zone. We can say, Bulls are out of the ICU but are still quarantined. Hopefully, peace will be restored in the Crypto world along with the economic growth amidst this Coronavirus outbreak.