BENGALURU: Emerging Asian equities hit a three-week high on Wednesday after a ceasefire between the United States and Iran sent crude prices below USD100 a barrel, calming oil-shocked markets and supporting regional currencies while the dollar eased.
The MSCI gauge of EM Asia equities surged 5.5 percent, marking its best intraday performance since mid-November 2022. A broader index of global EM equities jumped 5.1 percent to a three-week high, while its currency counterpart advanced nearly 1 percent.
Lower crude prices following the two-week ceasefire deal boosted investor appetite for assets in oil-importing developing economies in Asia.
“These negotiations and a pulling back from the brink are certainly positive, including for Asia, which has been and continues to be disproportionately hurt by a Strait of Hormuz closure,” MUFG analysts wrote.
“Nonetheless, while the probabilities have shifted in favour of a meaningful re-opening of the Strait of Hormuz over the next two months, we are still cautious on the risks for Asian economies and FX and rates markets for a few important reasons.”
Equity benchmarks in South Korea and Taiwan, which together account for nearly half of the emerging markets-Asia gauge, jumped almost 7 percent and 5 percent, respectively.
Stocks in Singapore, Indonesia, Malaysia, the Philippines, and Thailand advanced between 1 percent and 4 percent.
Currencies in the region also appreciated sharply as the dollar index weakened to its lowest point in four weeks.
The South Korean won appreciated about 2 percent to 1,471.6 per dollar, while the Taiwan dollar jumped to 31.78. Both currencies touched their highest level since early March.
In Southeast Asia, the Philippine peso appreciated to 59.407, its highest level in more than two weeks, while the Thai baht and the Malaysian ringgit climbed about 1.4 percent each.
The Indonesian rupiah rose to as much as 16,970 a dollar before paring gains to 17,010, after falling for three sessions.
While the two-week ceasefire is a positive development, the spike in global energy prices has started to filter into Asia’s inflation prints, with the pressure poised to persist in the months ahead, ANZ said in a note.
“Crucially, the inflation impulse is still in its early phase, and lags mean that the near-term trajectory can look worse even if global oil prices stabilise.”
India shares and the rupee held onto early gains after the central bank kept its key policy rate unchanged,, as it awaits clearer evidence of the impact from the Middle East conflict. Shares in Mumbai were up 3.7 percent, while the rupee was at 92.60 per US dollar.
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