As countries lock down borders, stocks, oil prices tumble again

Some airlines may need rescuing by their governments as planes are grounded, analysts say.

Stock markets in Asia took another pummelling after the US Senate failed to reach an agreement on a $1 trillion coronavirus rescue bill [Heo Ran/Reuters]
Stock markets in Asia took another pummelling after the US Senate failed to reach an agreement on a $1 trillion coronavirus rescue bill [Heo Ran/Reuters]

Kuala Lumpur, Malaysia – Nervous investors grappling with the costs of an economic standstill arising from the coronavirus pandemic sold more stocks on Monday, once again punishing Asian share markets.

Among the top losers in the region was Singapore Airlines after it said it would ground most of its passenger flights.

European markets also opened sharply lower, while global oil prices took another beating.

Globally, more countries joined a widening lockdown as borders were shut and travel banned, forcing airlines to drastically slash flight capacity and ground their planes. With no end in sight to the halt in global travel, many airlines could be left fighting for their survival, analysts say.

New Zealand became one of the latest nations to shut its borders to foreigners this week, with Prime Minister Jacinda Ardern saying the country will impose self-isolation, with non-essential services, schools and offices to be shut over the next two days to curb the spread of the coronavirus.

In the United States, a coronavirus response bill worth more than $1 trillion proposed by the administration of President Donald Trump stalled in the Senate after the measure failed to get the necessary 60 votes in the 100-member chamber, raising the risk of delay in delivering support to the coronavirus-hit economy.

Fragile sentiment

Talks are expected to continue after Democratic Party policymakers demanded more spending on medical care and state efforts to combat the pandemic, while criticising the Republican proposal for prioritising corporate interests.

“Sentiment is clearly extremely fragile in the markets, as we’ve seen repeatedly over the last few weeks and the fact that Congress is dragging its feet at such an important time is hugely disappointing and worrying for investors,” Craig Erlam, senior market analyst at OANDA, told Al Jazeera.

“I can’t imagine we’ll have to wait long for a stimulus package to pass and it will be substantial, but desperate times call for bold and swift action and, on this, the US is failing,” he said.

In Asia on Monday, Singapore led the region’s share market losses, with a 7.7 percent plunge in the city’s benchmark Straits Times Index (STI). Singapore Airlines, one of the biggest stocks on the index, fell 5.4 percent. The STI has lost almost a third of its value so far this year.

Australian benchmark, the S&P ASX 200 Index, tanked 5.6 percent, also leaving it about a third lower than at the start of the year.

New Zealand’s NZX 20 Index plunged 7.6 percent.

China’s Shanghai Composite index was down 2.9 percent; Hong Kong’s Hang Seng Index shed 4.8 percent; and South Korea’s Kospi Index slumped 5.3 percent.

In Europe, key indices in France, Germany and the United Kingdom were down between 4 percent and 4.5 percent in early trading.

Oil prices fell to levels not seen since 2003 as prospects for a deal for the world’s top producers to limit production dimmed amid a price war between Saudi Arabia and Russia.

Brent crude dropped 1.62 percent to $28.53 per barrel, while the US benchmark oil contract West Texas Intermediate lost 0.3 percent, reversing an earlier gain, to $22.56.

“Whether [the top producers] will get back together is a test of who’s got the deepest pocket right now. The US is in real pain as the shale producers are heavily-geared, Saudi is running a huge budget deficit and Russia, they just don’t care, they are used to hardship,” Gerald Ambrose, chief executive officer of Aberdeen Standard Islamic Investments in Malaysia, told Al Jazeera.

Without knowing when the pandemic will be contained and the disruptions it caused to cease, investors are selling even good stocks with solid fundamental value, he said.

Good stocks gone bad

“Good stocks are being sold. The question is when is this going to end, prices could fall much further,” Ambrose said.

In signs of more economic pain to come, many airlines are grappling with lost revenues as planes are grounded as borders close around the world.

Singapore Airlines said on Monday it woud cut 96 percent of its capacity that had been scheduled through the end of April, and ground about 138 planes out of a total fleet of 147 as it navigates through what the company said is the greatest challenge it has faced in its existence.

Dubai-based airline Emirates said on Sunday it will temporarily suspend most passenger flights by March 25, while it continues to fly to limited destinations including the UK, US and several Asian countries based on demand and border accessibility.

Some carriers may fail, while others may need rescuing by their governments, analysts said.

“I believe airlines will survive the crisis, albeit with some failures along the way,” said OANDA’s Erlam.

“They are too important not to, so governments will step in around the globe to save them, whether through credit facilities, backstop promises or nationalizations, if necessary,” he said.

“The question is whether governments will treat all airlines equally or just save those they deem to be strong and essential to the functioning of the overall economy. The reality may lie somewhere in the middle.”

Source : Al Jazeera

More from Economy
Most Read