Asian Shares Rise on Hopes the Worst of Pandemic is Over

The major Asia-Pacific stock indexes rallied on Friday as President Donald Trump’s plans to gradually re-open the U.S. economy offset data that showed China suffered its worst economic contraction on record due to the coronavirus outbreak.

At 05:42 GMT, Japan’s Nikkei 225 Index is trading 19845.17, up 554.97 or +2.88%. Hong Kong’s Hang Seng Index is at 24583.49, up 577.04 or +2.40 and South Korea’s KOSPI Index is trading 1918.88, up 61.81 or +3.33%.

China’s Shanghai Index is trading 2848.60, up 28.67 or +1.02% and Australia’s ASX/200 Index is at 5499.30, up 83.00 or +1.53%.

Trump Unveils Plan to Reopen States in Phases

Even as the coronavirus continues to spread across the United States, U.S. President Donald Trump has given governors guidance on reopening state economies in the coming months.

The guidelines for “Opening up America Again” outline three phases in which states can gradually ease their lockdowns. Trump also promised governors they would be handling the process themselves, with help from the federal government. Finally Trump has suggested some states could reopen this month.

The administration’s 18-page guidance document details three phases to reopen state economies, with each phase lasting, at minimum, 14 days.

Phase one includes much of the current lockdown measures such as avoiding non-essential travel and not gathering in groups. But it says large venues such as restaurants, places of worship and sports venues “can operate under strict physical distancing protocols.”

If there is no evidence of a resurgence of the coronavirus, phase two allows non-essential travel to resume. The guidance says schools can reopen and bars can operate “with diminished standing-room occupancy”.

Under phase three, states which are still seeing downward trend of symptoms and cases can allow “public interactions” with physical distancing and the unrestricted staffing of worksites. Visits to care homes hospitals can resume and bars can increase their standing room capacity.

China’s First-Quarter GDP Plunges

China’s first-quarter GDP shrank 6.8% in 2020 as compared to a year ago, according to data from the National Bureau of Statistics of China. That was the first quarterly decline since 1992, when official quarterly GDP reports started, according to Reuters. Analysts polled by Reuters had expected China’s GDP to have fallen 6.5% from last year, a sharp drop from the 6% growth recorded in the fourth quarter of 2019.

“We expect a significant sequential recovery in Q2 as economic life returns to normal,” economists at Oxford Economics wrote in a note following the data release. Still they cautioned:  “This recovery will be weighed down by weak domestic and foreign demand.”

Retail sales also fell more than expected in March, but industrial output only dipped slightly, suggesting its manufacturing sector at least is recovering more quickly.

Investors Looking to the Future

The Chinese data and other forecasts that said the world is in its worst recession in decades caused barely a ripple in Asian shares as investors focus instead on whether the pandemic is peaking and how soon governments will start to ease lockdowns which have crippled business and consumer activity.

“Stocks are reacting naturally to Trump’s talk of re-opening the economy, because some people don’t want to be left out of the rally,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank in Tokyo.

“The problem is there is a big gap between expectations and the underlying economic reality, which is that many countries are still very weak.”