Despite the coronavirus pandemic, prospects for Asia-Pacific stocks look bright beyond the short term

From its earliest days as a virus outbreak in China, Covid-19 has morphed into a worldwide health crisis likely to tip the global economy into a severe slump in the first half of this year.

Shocks to the US and euro zone – which could hasten recessions in some major economies – will delay recovery in the Asia-Pacific. China’s central bank has preferred timely liquidity management over a major rate cut, while targeted measures, such as tax breaks, have supported sectors under the most strain. Policy may ramp up further as global demand falls.

Although the manufacturing shock emanating from China doesn’t seem to have surfaced fully across Asia-Pacific yet – with falls in purchasing managers index output still modest – we don’t think this will last.