BENGALURU: Equities in Asian emerging markets scaled multi-year highs on Wednesday, with Singapore and Taiwan at record peaks, on bets that US labour market softness will prompt the Federal Reserve to deliver a much-awaited rate cut next week.
Indonesian stocks rebounded 1 percent after tumbling the most in three months on Tuesday, while the rupiah was little changed after approaching the 16,500 mark against the dollar the previous day.
The MSCI gauge of EM Asian equities jumped more than 1 percent to an over four-year peak. Taiwan’s benchmark index set a new record high, while South Korea’s KOSPI index jumped 1.7 percent to finish at its lifetime high.
Singapore’s FTSE Straits Times index also set a record, advancing more than 1 percent, fuelled by heavyweight banks, while stocks in Thailand and Malaysia edged higher.
Markets widely expect the Federal Reserve to deliver a quarter-point rate cut next Wednesday, with some predicting an 8 percent probability of a more aggressive half-point reduction, the CME FedWatch tool showed.
“The sharp weakening in US job growth results in a very high likelihood of a September Fed rate cut,” Nomura analysts wrote, adding that they, however, do not expect the Fed to panic with aggressive rate cuts.
Lower US rates weaken the dollar and cut financing costs, typically spurring capital flows to higher-yielding emerging markets, which prop up currencies, bonds, and equities.
Indonesia’s assets regrouped on the day after the sudden departure of illustrious Finance Minister Sri Mulyani Indrawati on Monday sent global investors rushing out of risk assets and long-tenor sovereign bonds.
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