Global impact of pandemic weighs more on markets than local situation, says AMRO

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DEVELOPMENTS on the coronavirus disease 2019 (COVID-19) pandemic around the world have more impact on the stock markets of ASEAN-5 economies than their local situation, according to a new research.

In a note released on Tuesday, ASEAN+3 Macroeconomic Research Office (AMRO) said the stock indices of the five nations are affected by the global COVID-19 situation via the spillover from the US stock market.

ASEAN-5 covers the economies of Indonesia, Malaysia, Philippines, Thailand, and Vietnam.

“The results of the study reveal that the ASEAN-5 stock markets are influenced by the global COVID-19 situation more, partly representing the investors’ concern on the export performance of the ASEAN-5 economies,” said the regional macroeconomic surveillance organization.

“Both the local and the US stringency policies have significant adverse impacts on the stock market returns because the lockdown is directly hurting economic activities, in turn, the expected earnings of listed corporations,” it added.


AMRO said ASEAN-5 markets first had a rapid plunge from mid-February to late March, similar to the US markets. However, their subsequent recovery was weaker compared with markets in the US.

It added that some have attributed the weak recovery due to changes in the global risk appetite on emerging markets despite the efforts of ASEAN-5 countries to support their economies.

“It is natural that the international investors allocate the investment to ASEAN-5 when the global risk is higher. However, when there is low global risk, international investors reallocate their investment again due to the changes in risk appetite,” AMRO said.

Meanwhile, it said the policymakers of ASEAN-5 should be cautious on the reaction of their respective stock markets to their monetary policies introduced since the pandemic, as local monetary conditions and short-term local interest rate could affect investors’ expectation on economic outlook and financial stability.

It said another tool that policymakers can use in mitigating the effects of the pandemic is their exchange rate policies, aside from monetary and fiscal policies.

“The ASEAN-5 stock market volatility can be reduced by the easy monetary policy of the regional authorities during the pandemic. The exchange rate movements of the ASEAN-5 are having an effect on their stock market performance,” AMRO said. — Revin Mikhael D. Ochave