Most Asian emerging market stocks rose on Thursday, while the Taiwanese dollar and the South Korean won led modest gains in the region’s currencies, as growing bets of US interest rate cuts further boosted investors’ risk appetite.
Shares in Singapore jumped 1.5% to hit their highest level since Oct 12. Equities in Kuala Lumpur, Manila and Seoul added between 0.2% and 1.1%.
In currency markets, the Taiwanese dollar strengthened 0.6%, hitting its highest level since June 16 and was on track to record its biggest quarterly gain since March 2017. The South Korean won also added 0.5%.
Thailand’s baht strengthened 0.4% to hit its highest level since July 31. It is also in track to record its biggest quarterly jump in five quarters.
Equities in Bangkok advanced 0.4%.
Emerging Asian assets have been gaining ground heading into the year-end as the greenback tumbles to multi-month lows.
Poon Panichpibool, a markets strategist at Krung Thai Bank, said he expected emerging market currencies would perform “quite well” in 2024 due to further weakness in the dollar because the US economy could enter a recession around the second quarter, leading to at least six to seven rate cuts.
However, he added that fears of a recession could trigger a sell-off across emerging market assets, and they could underperform in the near term during periods of risk aversion.
Most Asian equities, currencies edge higher on rising US rate cut bets
Investor focus remains on the timing of interest rate cuts by the Federal Reserve, with markets pricing in a 89% chance of a cut in March 2024, according to CME FedWatch tool.
Alvin Tan, head of Asia FX strategy at RBC Capital Markets, said he was not sure if the recent rally in Asian emerging markets currencies would last for long in the new year.
“We think that the market’s expectation for Fed rate cuts to start in Q1 is really overdone,” he said.
Market attention now turns to a stream of data including US initial jobless claims and Thailand’s trade data due later in the day and South Korea’s inflation figures on Friday.
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