BENGALURU: Emerging Asia equities traded prudently on Monday, with Indonesian stocks extending gains into a fourth session, ahead of an action-packed week of key central bank policy meetings that could see the US Federal Reserve resume its easing cycle.
The MSCI gauge of emerging market equities in Asia dipped lower in afternoon trade, but was anchored around a July 2021 peak. A subset of ASEAN equities also lingered around a February 2020 high.
Stocks in China slipped 0.3 percent on weak economic data, while South Korea’s KOSPI index inched up to a fresh all-time high, driven by the government scrapping its plan to raise taxes on stock investment. The won firmed 0.6 percent.
Investors will be keenly watching a busy slate of central bank meetings this week, including in the United States, Japan, Taiwan, Indonesia, England, Canada, and Norway.
The main focus will be on the Fed, which is widely expected to cut rates by a quarter point on Wednesday, and its language around its policy trajectory this year. Markets have begun to factor in as many as three rate cuts by the end of 2025.
“The upcoming Fed policy meeting is undoubtedly one of the most important ones in recent times and can have a bearing on the market outlook,” said Vasu Menon, managing director, investment strategy at OCBC in Singapore.
“With an abundance of liquidity on the sidelines and in the absence of a recession, Fed rate cuts could prove to be a tailwind for markets as history has often shown.”
Indonesia’s benchmark index advanced 0.8 percent to a one-week high. The rupiah hovered around 16,400 a dollar, while government bonds rallied, with the yield on the 10-year
at a two-week low of 6.321 percent.
Markets widely expect Bank Indonesia to hold its key interest rate at 5.00 percent on Wednesday, primarily to avoid any volatility in the rupiah in the wake of shocks from recent protests and the unexpected cabinet reshuffle.
Thailand’s stocks were rangebound through the day, while the baht slipped the most in more than six weeks to 31.920 per dollar.
The country’s new prime minister on Monday said the baht’s strength needs to be urgently addressed, as he faces an uphill task of turning around an economy grappling with US tariffs, high household debt, slackening tourism, and weak consumption.
The baht is up 7.5 percent this year, making it the second-best performing currency in Asia after Taiwan’s dollar. That strength, deemed “unnecessary” by market participants, undermines Thailand’s export competitiveness and its tourism sector.
Singapore’s FTSE Straits Times slipped but lingered around its record high, while stocks in Manila fell about 1 percent to their lowest since mid-April.
Markets in Malaysia and Japan were closed for a public holiday.
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