HONG KONG • The US Federal Reserve’s (Fed) unprecedented bond buying programme as thrown a lifeline to Asian equities as the dollar’s reversal eased concerns over capital flight from the region and fuelled risk appetite.

The MSCI Asia-Pacific Index rallied as much as 4.8% as of 3:58pm in Hong Kong yesterday, set for the most since October 2008. South Korea stocks jumped 8.6% after the nation doubled its emergency funds, while Japan’s blue-chip measure Nikkei 225 rose 7.1%, the most since 2016. Hong Kong’s Hang Seng Index closed 4.5% higher.

It is a sharp contrast to a sea of red for Asian equities on Monday that saw record losses for India and New Zealand benchmarks after announcements on nationwide lockdowns. The Fed’s unlimited quantitative easing prompted traders to return to risk assets, sending almost all Asia-Pacific currencies including the Australia dollar and the South Korean won jumping.

“The Fed’s latest round of stimulus is a game changer,” said Edward Moya, a senior market analyst at Oanda Corp. “The Fed has delivered three huge acts in March and this latest one should satisfy everyone, including US President Donald Trump.”

Most risk assets rose yesterday and the dollar snapped a 10-day rally. Spreads on dollar notes in Asia tightened for the first time in 10 days after the Fed action, but remain near Monday’s eight-year high. China plans to lift lockdown measures in Wuhan, the city subjected to a mass quarantine since the start of the coronavirus outbreak. Global cases have topped 390,000 with more than 17,000 deaths (at press time).

“A drop in the US dollar helped a lot,” said Steven Leung, an ED at UOB Kay Hian (Hong Kong) Ltd. “It will also help ease pressure on the region’s capital outflow.”

Meanwhile, investors are still waiting for the passage of the largest stimulus bill in the US history to fight the economic fallout of the coronavirus. Futures contracts on the S&P 500 added 5.1% in late Asian afternoon, hitting exchange-enforced bands that prevent further gains, reflecting speculation that Congress would eventually pass a spending package.

Yet, some market veterans including Mark Mobius warned that volatility can continue in Asian equities.

“As the economic impact of the shutdowns around the world begin to work their way through the economics, we can expect more volatility,” Mobius said. “Our research indicates that the average length of a bear market is a little less than two years,” he added. — Bloomberg