BENGALURU: South Korean shares gave up early gains on Thursday after the central bank held interest rates steady, while expectations of a US rate cut next month lifted most other emerging Asian markets, highlighting a rebound in risk appetite in the region.
Seoul equities were up 0.7 percent after rising as much as 1.6 percent earlier in the session, while the won, which has lost around 8 percent in the second half of the year, was 0.2 percent higher.
The Bank of Korea (BOK) left its key rate unchanged at 2.50 percent in the face of a weak won and rising financial stability risks from persistent housing price gains in Seoul.
“The likelihood of a January rate cut is now further reduced and likely pushed back to February next year, given stronger growth expectations, lower trade risks, and a higher inflation trend generally due to exchange rate passthrough,” said Kelvin Lam, senior China+ economist at Pantheon Macroeconomics.
“Governor Rhee Chang-yong’s comment that policy rates are ‘near neutral level considering financial stability’ suggests that even if the BOK does cut in Q1, it is already running close to the end of its easing cycle.”
Among other stock markets in the region, Taiwan rose 0.5 percent and was on track for a fourth straight session of gains, while Singapore added 0.4 percent.
Jakarta shares scaled a record high of 8,622.268 before reversing course to trade 0.3 percent lower. In the last four sessions, the benchmark index has risen nearly 2 percent.
Investors have returned to Asian assets as risk appetite has recovered amid firming bets for a rate cut from the US Federal Reserve next month.
US rate futures have now priced in a more than 80 percent chance of a Fed rate cut next month, according to the CME Group’s FedWatch tool.
Overall, external pressures appear to be easing, supported by lower oil prices and the prospect of further Fed rate cuts, which together could support global risk sentiment heading into year-end, said Lloyd Chan, a senior currency analyst at MUFG.
Shares in Manila slipped 0.6 percent, while Bursa Malaysia dipped 0.5 percent. Both benchmarks have underperformed regional peers this year, along with Thailand shares. The SET Index has declined more than 10 percent this year.
Currencies in Asia were largely muted on the day, with the rupiah and Malaysian ringgit appreciating slightly.
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