Asian stocks rise on China stimulus prospects, currencies edge higher

By John Biju

Feb 7 (Reuters) –Most Asian equities advanced on Wednesday, boosted by Chinese measures to support the country’s stock market, while currencies gained as the dollar lost steam with markets looking for further direction on the Federal Reserve’s rate-cut prospects.

MSCI’s emerging market Asia index .MIMS00000PUS rose as much as 0.9% hitting its highest level since Jan. 3.

Equities in South Korea .KS11 climbed as much as 1.9% to hit their highest level since Jan. 3. Stocks in Philippines .PSI and Singapore .STI gained more than 1% each.

Stocks in Shanghai .SSEC jumped 1.0% after regulators announced further curbs on short selling and state investors said they were expanding their stockbuying plans to support slumping share markets.

A news report stating President Xi Jinping was set to discuss the nation’s stock market with financial regulators, also provided a boost to sentiment. However, there was no confirmation this had happened or what was discussed.

“The support measures from the Chinese authorities will likely boost the market over the near-term which could also benefit the CNY as well as EM Asia FXs,” Poon Panichpibool, Markets Strategist at Krung Thai Bank said.

He added that to see further rise in the yuan (CNY) and other emerging market currencies, we have to see continual improvement in the China economic data.

Meanwhile, the Bank of Thailand (BOT) is due to announce its interest rate decision later in the day, where it will likely keep its key interest rate unchanged, according to a Reuters poll.

The Thai central bank has been under increased political pressure to cut rates after Prime Minister Srettha Thavisin again called for a cut in borrowing costs to revive economic growth, with inflation in the country slowing for a fourth straight month in January.

“The Bank of Thailand is widely expected to keep policy on hold. But it is now a closer call whether Bank of Thailand could bring forward rate cuts given repeated urging by the government,” Moh Siong Sim, FX strategist at Bank of Singapore said.

The Thai baht THB=TH edged 0.2% higher while equities .SETI were marginally up 0.1%.

Currencies in the region also edged higher after the U.S. dollar pulled back from a near three-month high and remained under pressure after a recent rally. FRX/

The South Korean won KRW=KFTC, the Philippine peso PHP= and the Indonesian rupiah IDR= climbed 0.3% each.

Market participants are now awaiting fresh clues on when the U.S. Federal Reserve will cut rates, after a bumper jobs report last week and hawkish rhetoric from Fed Chair Jerome Powell, saw markets pushing back expectations of rate cuts.

Traders are currently pricing in a 19.5% chance of a cut in March, according to the CME Group’s FedWatch Tool, compared with a 68.1% chance at the start of the year.

HIGHLIGHTS:

** China inflation data, Reserve Bank of India interest rate decision on investor’s radar

** China expresses concerns to US over tariffs, sanctions in Beijing talks

** Japan can retain deflation-fighting mandate even if BOJ ends negative rates -govt official

Reporting by John Biju in Bengaluru; Editing by Stephen Coates