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."

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."