BENGALURU (July 1): Asian equities traded cautiously on Wednesday after a record six-month rally, as fresh hurdles in US-Iran talks dampened sentiment, while currencies weakened against a strengthening dollar.
Investors took a cautious step back after a blockbuster quarter marked by artificial intelligence (AI)-fuelled gains across global markets, from South Korea to the US, even as Middle East tensions, faltering peace negotiations and sticky inflation repeatedly tested sentiment.
Iran on Tuesday said it would not meet with top US envoys who flew to the region following an outbreak of hostilities, clouding the prospects for a lasting peace between the two countries and dampening risk appetite.
The MSCI EM Asia equities gauge was largely unchanged on the day, after adding over 30% in the prior three months — its best quarterly showing since June 2009. That was largely due to AI-related stocks in South Korea and Taiwan.
On the day, Taiwan’s benchmark gauge advanced more than 2% on the back of a 3.9% gain in TSMC, while South Korea’s benchmark Kospi index dropped as much as 4%.
Benchmark indices in the Philippines and Thailand advanced 0.5% and 0.1% each.
Stocks in Indonesia advanced over 1%, but remained around three-week lows after a near 11% decline since mid-June when MSCI raised new transparency concerns and later deferred Indonesia’s emerging market status review to November.
The rupiah slipped to as weak as 17,980 per US dollar, making another run at the key 18,000 level it has not crossed for the past three weeks.
Investor sentiment towards Indonesia, one of Asia’s key commodity exporters, remains dented due to a slew of domestic fiscal and governance concerns, with a string of corruption scandals and spending priorities sparking protests.
“Investors are really not happy and comfortable with recent government developments in Indonesia,” said Fadhlan Banny, an equity research associate at Samuel Sekuritas Indonesia.
Foreign investors have pulled nearly US$4 billion (RM16.38 billion) from Indonesian equities this year, the highest since at least 2010, exchange data showed.
“From our perspective, Indonesia is now entering a stabilisation phase,” said Fakhrul Fulvian, chief economist at Trimegah Sekuritas Indonesia.
“The bond market has started to recognise the policy shift, particularly the move toward restoring a more market-clearing yield curve and tighter liquidity conditions,” Fulvian added.
Currencies remained on the back foot as the dollar drew additional support from a sharp rise in US Treasury yields on growing expectations that the Federal Reserve could resume raising interest rates.
The Philippine peso slipped to 61.537, the lowest since June 10, while the Thai baht, the Singapore dollar, the Malaysian ringgit, and the Taiwan dollar inched lower.
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