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Hong Kong Market surges as central banks go all-in

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Headline indices of the Hong Kong stock market finished sharp higher on Friday, 20 March 2020, as investors chased for bottom fishing after central banks and governments around the world unleashed a torrent of stimulus measures designed to cushion the shock from coronavirus. Meanwhile, buying momentum spirited after reports that government is removing barriers to the movement of people and goods in much of the country after announcing that new cases of local coronavirus transmissions had fallen to zero. At closing bell, the benchmark Hang Seng Index surged 5.05%, or 1,095.94 points, to 22,805.07. The Hang Seng China Enterprises Index spurted 6.53%, or 559.03 points, to 9,118.67.

Hong Kong stock market finished tumultuous week on a more positive note after central banks around the world including the US Federal Reserve, European Central Bank and the Bank of England announced huge new injections of funds into financial markets to support credit markets and the economy. They've been backed by governments, which have committed trillions of dollars worth of new spending and credit guarantees to help support their economies.

The New York Federal Reserve continued its effort to create liquidity in the strained financial markets by announcing it would purchase another $10 billion of mortgage-backed securities, part of a larger package of $200 billion in mortgage bonds the Fed promised on Sunday to buy as it relaunched quantitative easing. The US central bank has also taken steps to ease an acute shortage of dollars that was destabilizing markets. Also on Thursday, the European Central Bank launched a program to inject money into credit markets by purchasing up to 750 billion euros ($820 billion) in bonds. The Bank of England cut its key interest rate to a record low of 0.1%.

Australia's central bank also cut its benchmark lending rate to 0.25%. Central banks in Taiwan, Indonesia and the Philippines also cut their benchmark rates. Hopes are rising for progress in finding virus treatments and that a boatload of stimulus by both central banks and governments will put the global economy in position for a U-shaped recovery,

Investors also appeared to be encouraged by reports that China is set to ramp up stimulus spending after the province where the virus emerged in December showed no new infections on Wednesday. As central banks worldwide slash interest rates, though, the People's Bank of China on Friday kept its new benchmark lending rate unchanged on Friday. The one-year Loan Prime Rate remained at 4.05% for March, while the five year rate held steady at 4.75%. That China's central bank left those rates unchanged is a sign that the country's fight against the novel coronavirus pandemic is at a different stage than the rest of the world.

China is removing barriers to the movement of people and goods in much of the country after announcing that new cases of local coronavirus transmissions had fallen to zero. The government will take measures to speed up the return to work for millions of people, including getting rid of mandatory quarantines for workers in parts of the country now considered low-risk, Li Keqiang, China's No. 2 official, said in a statement. China is eager to get the economic engines of the world's second-largest economy up and running again after damaging government data pointed to the possibility that it will face its first economic contraction since 1976.

Commerce and industry stocks led the gain, followed by properties and finance, according to Hang Seng gauges. Heavyweight Tencent Holdings ran up 4.8 per cent, while CK Asset Holdings shot up 12 per cent on its 2019 results, and casino operator Galaxy Entertainment also soared 12 per cent.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, March 20 2020. 17:25 IST