BENGALURU (Dec 20): Most emerging Asian stocks and currencies rose on Wednesday, helped by investor confidence about US rate cut prospects next year despite pushback from some policymakers.
Shares in Seoul rose about 1.8%, notching their fifth consecutive session of gains. Equities in Bangkok and Manila advanced 0.5% each.
Meanwhile, South Korea’s won rose 0.7%, snapping a three-day losing streak. The country’s central bank chief, Rhee Chang-yong, said he agrees with the view that odds of Federal Reserve (Fed) rate cuts were rising, which would offer Korean policymakers a chance to focus on domestic factors.
Malaysia’s ringgit also added 0.5%, hitting its highest level in around three weeks.
“There are higher inflows in the Asian assets and the rally is explained by the ongoing risk-on sentiment as Fed pivot bets are still on and unfettered,” Vishnu Varathan of Mizuho Bank said.
Emerging assets gained ground, defying recent pushback from Fed officials, as investors continued to bet on rate cuts next year after Chair Jerome Powell’s unexpected dovish stance last week.
Markets are eyeing the US core personal consumption expenditure index data due on Friday, which will set expectations for the Fed’s policy stance next year.
Varathan added that potential risks to market confidence include surging oil prices because of an escalation in the Middle Eastern conflict.
“The maritime disruptions in the Red Sea after militant attacks and the war in Gaza could push up freight and oil prices, taking some froth off (the market rally) at some point.”
The surge in oil prices due to the supply disruption poses a fresh risk to inflation and fiscal health of net importers like Thailand and India.
Thailand’s baht was last down 0.3%, while the Philippine peso and the Taiwanese dollar added 0.3% each. The Indian rupee was largely unchanged.
Indonesia’s rupiah was largely unchanged while stocks rose 0.6%. Bank Indonesia is set to hold its policy meeting on Thursday, with markets expecting the central bank to keep rates on hold.
Meanwhile, China’s central bank kept its benchmark lending rates unchanged at the monthly fixing on Wednesday, in line with market expectations, amid worries of deflation and slower economic growth.
The Chinese yuan declined 0.2%. Shares in Shanghai also lost about 0.8%.
