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Volatility Moves Markets – What Stimulus Can Do

As major economic indicators are wrecked by the coronavirus, the clamor for a substantial stimulus from the government continues to grow include additional tax breaks

The equity market is wary—it sees profit-booking after every rise. Experts say a stimulus is much needed and will offer relief to the market and the economy, which has been ravaged by the virus and the subsequent restrictions in the country and across the region.

Domestic economic reality is the biggest trigger for the market. In the short-to-medium term, the market is expected to tread water.

Investors have pinned hopes on the government, seeking assurance that the economy will not be allowed to fall to unprecedented lows.

The market is not expecting a bazooka from the government as it has limited fiscal space, the stimulus will be more of limited and specific relief that will mostly be filtered through the banks. Nevertheless, a stimulus package would not address the urgent need for a cash-flow boost required by corporate and individuals in the country.

Our market does not expect the stimulus similar to the US and Europe with Trillions of dollars poured out to the economy but something promising from the government will definitely push the market on a positive trajectory, or at least maintain at these levels. People understand that the target of fiscal deficit is already breached.

The National Treasury has already done a lot from whatever has been possible from the balance sheet.