BENGALURU (June 9): Emerging Asian equities bounced back on Tuesday after Israel and Iran said they had halted attacks on each other, with AI-linked stocks in South Korea and Taiwan rebounding after a sharp correction in the previous session.
Currencies also found support from oil prices falling after sharp gains on Monday: the South Korean won appreciated to 1,514 per dollar, while the Malaysian ringgit recovered from a five-month low.
The MSCI EM Asia equities index recovered nearly 4%, reversing much of the decline recorded on Monday. A gauge tracking Asean stocks also rebounded from an eight-month low hit in the previous session.
Investors rushed into battered equities after Iran and Israel said they had halted attacks after an appeal from US President Donald Trump, although restricted oil flows through the Strait of Hormuz and a peace deal proving elusive remain a key overhang on the markets.
“Markets again witnessed swings in Mid-East geopolitics as the tensions escalated, only to de-escalate later again,” Maybank analysts said.
Emerging markets have been under growing strain as elevated oil prices have built inflation pressures in energy-importing economies, worsened fiscal balances, pushed bond yields higher, and triggered massive capital outflows.
South Korea’s benchmark Kospi index rebounded sharply on the day, surging 8% and triggering a sidecar mechanism within minutes of opening. It ended more than 8% in the red the previous day on rising bets on US rate hikes.
Chipmarkers SK Hynix gained 6.65% on Tuesday, and Samsung Electronics rose 3.05%.
The Kospi, despite a 15% decline over the past three sessions, remains around 90% in the green this year, largely driven by leveraged equity investment by retail investors, which has topped a record 60 trillion won as of the end of May, according to a Bank of Korea report.
Equities in Taiwan also gained as much as 2.5% on Tuesday, and are up 54% for the year. Top contract chipmaker TSMC has advanced 49% so far this year.
In Southeast Asia, Jakarta’s equity benchmark snapped a four-session losing streak, rebounding as much as 3.6%. Regardless, the benchmark was deep in the red for the year, with a 37% decline, and was on track for its worst year since 2008.
Doubts persist about the country’s ability to defend its fiscal position as the government’s populist policies and rising energy import costs drain its finances.
Concerns around the commodity export policy, an upcoming MSCI investability review, and the risk of political interference in the central bank are further eroding investor confidence.
Those concerns are squarely reflected in the Indonesian rupiah’s sharp 8% depreciation since the start of the Middle East war, making up most of its annual losses. The currency last stood at 18,185 a dollar, within a hair’s breadth of its record low of 18,190.
Moves in other Asian currencies were largely muted: the Philippine peso, the Singapore dollar, and the Indian rupee inched higher, while the Thai baht slipped marginally to 32.875 a dollar.
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