Singapore stocks lead gains among emerging Asian equities; currencies mixed

By Adwitiya Srivastava and Echha Jain

Aug 13 (Reuters) –Singapore shares rallied on Tuesday and the local dollar gained after the trade ministry slightly raised its expectations for the island country’s economic growth reflecting favourable external demand.

Singapore’s Ministry of Trade and Industry updated its growth forecasts for the year to between 2% and 3%, the upper end of its previous forecast range of 1%-3%.

Singapore stocks .STI added 1% while the local currency, the Singapore dollar SGD= strengthened 0.1% against a steady greenback.

“In the medium-term, we remain positive on the Singapore dollar given robust macro fundamentals and a monetary policy that has an appreciating currency as a default stance,” analysts at Maybank said.

Singapore on Tuesday also posted gross domestic product growth of 2.9% in the April-June quarter from a year earlier, above market expectations.

Indonesian stocks and its currency, the rupiah, strengthened on Tuesday even as the country’s finance minister Sri Mulyani warned that the economy faces global political and economic headwinds.

The Indonesian rupiah IDR= gained 0.4% against a steady greenback, while stocks in Jakarta added 0.7%, a near three-week high.

The rupiah has been among the worst performing emerging Asian currencies over the past year around worries of a wider fiscal deficit, but favourable domestic conditions, including a new elected government, have buoyed the currency.

The currency has rallied around 2.6% this quarter.

Analysts currently expected Bank Indonesia (BI) to cut interest rates in the next policy meeting.

There have been “better fund inflows lately into Indonesian bonds on expectations of BI rate cuts, and this appears to be extending into today’s session,” said Alvin Tan, head of FX Strategy at RBC Capital Markets.

Markets will now pivot their focus towards Wednesday’s U.S. consumer price index print for a view on whether the Federal Reserve may look to lower benchmark interest rates at its upcoming monetary policy meeting in September.

Any Fed move is expected to give cues to central banks in Asian economies weighing next steps for local interest rates.

“Domestic conditions will determine whether central banks will cut, hike or stay on hold,” said analysts at Morgan Stanley, adding that Asian central banks will be considering the trio of U.S. growth, Fed policy path and the U.S. dollar.

HIGHLIGHTS:

** India’s July retail inflation eases to five-year-low of 3.54% y/y

** Japan’s Nikkei climbs 2% on return from holiday as yen stabilises

** Philippine central bank set to hold rates on Aug. 15 but decision close

Reporting by Adwitiya Srivastava and Echha Jain in Bengaluru; Editing by Sonali Paul