The major Asia-Pacific stock indexes rose on Tuesday in limited action with shares in Hong Kong up sharply despite a report showing the city’s economy had contracted the most in 46 years. Australian shares also gained while markets in China, Japan and South Korea remained closed for holidays.
Hong Kong shares on Tuesday recouped some of the previous session’s sharp losses, tracking gains in broader Asia, as countries laid out plans to ease coronavirus-induced restrictions.
On Tuesday, Hong Kong’s Hang Seng Index settled at 23868.66, up 254.86 or +1.08% and Australia’s S&P/ASX 200 Index finished at 5407.10, up 87.30 or +1.64%.
Hong Kong Suffers Deep Contraction
Hong Kong suffered its deepest economic contraction on record in the first quarter, with the worst drop since at least 1974, as the virus dealt a heavy blow to business activity, already in decline following months of anti-government protest last year.
In a statement, Hong Kong Financial Secretary Paul Chan said the “external environment is still very challenging” even though the virus situation in the city “seems to be under control.”
“Going forward in the second quarter, we believe that even if there is improvement, the improvement will be gradual and small,” Chan said.
Australian Shares End Higher on Plans to Ease Virus Restrictions
Australian shares closed higher on Tuesday, as upbeat sentiment following the government’s plans to further ease coronavirus-led restrictions outweighed grim forecasts from the central bank’s policy meet.
Additionally, Australia and New Zealand discussed plans to open their borders to allow trans-Tasman travel as they looked to slowly reopen their economies.
Reserve Bank of Australia Warns of Largest Ever Contraction
The RBA on Tuesday held its benchmark rates at a record low of 0.25%, but also said the economy would suffer its largest ever contraction in the first half of the year.
“Globally, financial markets are working more effectively than they were a month ago, although conditions have not completely normalized,” RBA Governor Philip Lowe said in a statement announcing the central bank’s decision. “The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 percent target band.”
Financial stocks advanced on the news, with all of the “Big Four” banks rising between 1.4% and 1.8%.