Kospi leads gains in Asia after South Korea’s government proposes almost $10 billion extra budget

Global stock markets diverged on Wednesday, as an emergency rate-cut by the U.S. Federal Reserve a day earlier prompted some investors to question how much central banks can do to offset the economic impact of the novel coronavirus.Market moves in the Asia-Pacific region ranged from losses in Australia to solid gains in South Korea, while U.S. futures advanced more than 1%suggesting Wall Street could claw back some of the previous days roughly 3% losses. Bond yields hovered near record lows.On Tuesday, the Fed cut its key rate by half a percentage point to between 1% and 1.25%, the first such move between scheduled policy meetings since the 2008 financial crisis.Even so, major U.S. indexes fell, reflecting concerns that the central bank cant on its own prevent a drop in confidence and spending without a commanding response from public-health authorities and other government agencies.
A pretty important turning point might have emerged, as investors start to realize the limits of the central banks, Paras Anand, the chief investment officer for the Asia Pacific region at Fidelity International, said during a call with reporters on Wednesday.
Mr. Anand said while central banks had been more active in recent years, monetary policy couldnt effectively counter problems stemming from the coronavirus such as shocks to demand or to corporate earnings.
Kevin Leung, executive director for investment strategy at Haitong International Securities in Hong Kong, said the Feds action stoked concerns that coming economic data could be very weak, or it believed the epidemics effects would be worse than is widely expected.
People start to ask, do they know something? Or should we sell now to avoid things [getting] really bad ahead? Mr. Leung said.
Australias benchmark
ASX
200 fell 1.7% to close at a nine-month low, while Hong Kongs benchmark Hang Seng Index was down by 0.2% by midafternoon.
Japans Nikkei 225 and Chinas Shanghai Composite Index eked out small gains, finishing 0.1% and 0.6% higher respectively.
South Korea was a regional bright spot. The Kospi index advanced 2.2%, after the government proposed a roughly $10 billion extra budget to help offset the impacts of the outbreak.
In debt markets, the yield on the benchmark 10-year U.S. Treasury stood at 0.98%. This widely watched rate had fallen below 1% for the first time on Tuesday as investors sought safe-haven assets. Yields fall as bond prices rise.
Alex Au, managing director at Alphalex Capital Management, a hedge fund based in Hong Kong, said he thought the Fed had acted too soon, given that it had limited room to further reduce borrowing costs before hitting negative rates.
Mr. Au added that it was hard to determine how much further markets might sell off. I am just holding my cash, sitting on the sidelines and waiting for clearer signals, he said.
However, he said a weaker U.S. dollar might support some emerging-market stocks. The WSJ Dollar Index has declined about 1.3% in the past five sessions.
—Quentin Webb contributed to this article.
Write to Xie Yu at Yu.Xie@wsj.com
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