BENGALURU: AI stocks drove emerging Asian equities higher on Friday while currencies held ground, with investors reluctant to make big moves as they awaited progress on the agreement to extend the US-Iran ceasefire.
The MSCI index of EM Asia equities climbed about 2 percent, touching all-time highs, recovering from steep losses in the previous session. The rally was driven largely by technology and AI-linked stocks in South Korea and Taiwan, which together account for more than half of the index.
South Korea’s KOSPI index climbed nearly 4 percent, touching record levels, while the won weakened to 1,508 per dollar in what analysts described as a typical “risk-on” hesitation phase for EM currencies.
The benchmark has climbed 8 percent this week and a whopping 28 percent this month. It has also more than doubled in value over the past five months.
Taiwan’s benchmark stock index rose about 3 percent on the day to hit a new lifetime high, as foreign investors poured money into the island’s technology sector. The gauge ended May about 15 percent higher, taking its yearly gains to 54 percent.
Chipmaking giant TSMC, which constitutes about 42 percent of the benchmark index, jumped 2.6 percent to a record high on the day.
“We think the AI infrastructure cycle remains structurally supportive for Asian equities over the medium term,” Song Zhe, a senior investment specialist with BNP Paribas Asset Management, said.
However, Song struck a cautious note “as the rally since April has been extremely rapid and likely amplified by strong retail participation — a classic ‘too far, too fast’ dynamic”.
Oil-importing Asian economies remain vulnerable to prolonged high oil prices, which are widening current-account deficits, driving capital outflows, and pressuring local currencies.
Investor caution persisted despite reports that the United States and Iran had reached an agreement to extend the ceasefire and ease shipping restrictions through the vital Strait of Hormuz.
The dollar index strengthened during Asian trading on Friday but was still on track for a weekly decline as hopes for a peace deal, pending approval from US President Donald Trump, limited gains in the greenback.
Regional currencies nevertheless weakened, with the South Korean won down 0.9 percent, while the Philippine peso and the Singapore dollar posted modest declines.
Indonesia’s rupiah hit another record low of 17,885 a dollar, pressured by capital outflows on concerns over a range of domestic issues including equity market governance and commodity export controls.
Jakarta stocks rose more than 1 percent, posting their biggest daily gain in two weeks. Despite that, the benchmark has lost more than 10 percent in May, clocking its fifth straight month of losses.
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