BENGALURU: Emerg-ing Asian equities and currencies advanced on Tuesday, tracking a rebound in Chinese markets after Beijing ramped up efforts to arrest recent heavy stock market losses, while investors cautiously reassessed Federal Reserve rate-cut bets.
Equities in Shanghai jumped 3.1%, posting their biggest percentage gain since March 2022, rebounding from a five-year low hit on Monday.
Following suit, Thailand stocks climbed about 1%, and those in Indonesia and India gained 0.4% and 0.6%, respectively.
Market sentiment received a boost after a slew of announcements from China’s securities regulator, and a news report that President Xi Jinping was set to discuss markets with financial regulators, highlighting the authorities’ urgency to provide a policy boost.
Christopher Wong, FX strategist at OCBC, said the support measures were helping to lift sentiment for Asian currencies in the region to some extent as well, but questioned the sustainability of the rebound.
“Markets need to see more concrete action coming from policymakers and not just buying up equities,” he added.
Currencies in the region also edged higher with the Singapore dollar and the South Korean won climbing 0.2% each.
Meanwhile, a string of robust US economic data, including the bumper payrolls report from last week, and hawkish comments from Fed policymakers have prompted investors to reassess their rate-cut expectations for the year.
Traders are pricing in a 15% chance of a Fed rate cut in March, down from 46% a week ago, according to the CME Group’s FedWatch Tool.
“Most Asian central banks are likely to wait for the Fed to begin cutting rates before moving themselves,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
He added that key exceptions were the People’s Bank of China, which has already begun easing, “and possibly the Bank of Thailand due to the government’s pressure to support the economy”.
The Bank of Thailand is due to announce its policy decision on Wednesday, in which it is expected to keep its key interest rate unchanged and leave it there until early 2025, according to a Reuters poll.
Data on Monday showed Thai inflation slowed for a fourth straight month in January.
That prompted Prime Minister Srettha Thavisin to again call on the central bank to cut interest rates, saying a 25 basis-point cut would help people and not stoke inflation.
The Thai baht gained 0.4%.
Data in the Philippines showed annual inflation increased at its slowest pace in over three years.
However, the Bangko Sentral ng Pilipinas (BSP), which is set to meet on Feb. 15, reinforced its hawkish stance saying monetary policy would have to stay ‘sufficiently tight’ until a sustained downward trend in inflation becomes evident.
The peso added 0.3% on Tuesday.