Stock markets likely to slump on budget disappointment, global peers skid3 min read . Updated: 03 Feb 2020, 08:24 AM IST
- Chinese equities crack as traders return from Lunar New Year break amid coronavirus outbreak
Mumbai: Indian stock markets are seen under pressure at the start of the week on Monday after investors were left disappointed by the government measures announced in the Union Budget for 2020-21. The market had hoped for some growth boosters which the budget proposals lacked.
Asian markets looked set for another bumpy ride on Monday on concern that the novel coronoavirus outbreak may hit global growth, with all eyes on China where trading resumes today following the Lunar New Year break.
A total of 361 people have died in China from the new virus, with the first death out of the mainland reported on Sunday in the Philippines. Looking to head off any panic, China's central bank plans to inject 1.2 trillion yuan ($173.8 billion) of liquidity into the markets via reverse repo operations on Monday. Beijing also said it would help firms that produce vital goods resume work as soon as possible.
Stocks in mainland China plummeted more than 7% today as traders returned to the market following an extended holiday amid the coronavirus outbreak. The Shanghai composite fell 7.3% while the Shenzhen component dropped 7.5%. The Shenzhen composite also declined 7.7%. Indices had declined almost 9% in early trade.
Despite announcements by Beijing, the broadest index of Asia-Pacific shares outside Japan was 0.5% lower, on track for an eighth straight day of losses.
Japan's Nikkei stumbled 1.5% and South Korea's KOSPI was off 1.4%. Australia's benchmark index was down 0.7%, while New Zealand shares fell 1.8%.
On Friday, the Dow fell 2.1%, the S&P 500 declined 1.8% and the Nasdaq Composite dropped 1.6% as economists tempered their outlook for the world's second-largest economy. The steps include a withholding tax rate of 5% for FPIs investing in the bond market, eliminating the dividend distribution tax (DDT), letting them claim credit in home jurisdiction, almost a total exemption for sovereign wealth funds if they invest in infrastructure and other notified priority sectors.
Meanwhile, the Indian government has initiated preparations for the mega initial share sale of state-owned Life Insurance Corporation of India and would take about a year to complete the transaction as the process may involve amending several laws. An inter-ministerial committee will be set up comprising officials from the department of investment and public asset management (DIPAM), department of financial services and law ministry to oversee the stake sale in India’s largest insurer, finance secretary Rajiv Kumar said on Sunday.
Finance minister Nirmala Sitharaman took several measures to woo foreign portfolio investors (FPIs) after the misstep last year on imposing a surcharge on investors which were registered as a trust.
Shares of ITC are likely to be in focus after the government increased taxes on tobacco and tobacco products.
Indian bonds look set to rally when markets open on Monday after the new federal budget projected fiscal deficits in line with expectations, without any further market borrowing during the current fiscal year.
In currencies, the safe-haven Japanese yen held near a 3.5-week high against the dollar at 108.41 after adding about 1.5% in the last two weeks.
The risk sensitive Australian dollar, which is often traded as a liquid proxy for the Chinese yuan, tumbled 2% last week to hit a four-month trough of $0.6683. It was last up 0.1% at 0.6694. The dollar index, which measures the greenback against a basket of major currencies, was a shade higher at 97.439.
Gold, which posted its best month in five in January, eased to $1,588.72, while yields on US debt lingered near five-month lows as the United States, Japan and other countries tightened travel curbs to China.
Oil futures skidded on concerns that the coronavirus outbreak would hit China's oil demand. Brent crude slid $1.06 to $55.56 a barrel, the lowest since January 2019. U.S. crude slipped 84 cents to $50.72.
(Reuters contributed to the story)