Regional bourses more affected by global Covid-19 figures than local cases: Study

THE hit to regional stock markets in the first nine months of 2020 stemmed more from global pandemic developments than local Covid-19 outbreaks, researchers have found.

The one-sided impact was attributed not just to spillover from US equities markets, but also investors' concerns about the export performance of the Asean-5 economies.

This is as Covid-19 infections and deaths in the United States significantly moved the needle on daily stock market returns, according to a review of trading on the Indonesia, Malaysia, the Philippines, Thailand and Vietnam bourses, released on Tuesday.

Yet the Asean+3 Macroeconomic Research Office observed that the number of virus cases and deaths in the Asean-5 economies did not significantly affect returns, based on daily data from Jan 2 to Sept 30, 2020.

Meanwhile, Covid-19 developments generally did not affect the volatility of Asean-5 stocks - except when US virus controls were tightened, which lowered regional volatility.

The researchers concluded: "Asean-5 policymakers have to beware of not only their domestic lockdown but also the lockdown in the US in the current pandemic."

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Still, the analysis found that monetary policy and foreign exchange rate movements had statistically significant impacts on Asean-5 stock market returns and volatility. The report thus suggested that "policymakers should use all policy options to mitigate the adverse impact" of the pandemic: "Besides monetary and fiscal policies, exchange rate policy could also be an effective tool."