Equities in emerging Asia advanced on Monday, led higher by stocks in Indonesia, Taiwan, and South Korea, as bleak US labour data boosted Federal Reserve (Fed) rate cut hopes and easing regional political tensions supported demand for risk assets.
Thailand's stocks jumped 0.9% in early trade and its currency, the baht, hit a more than four-year high, after the country elected a political veteran as its new prime minister last Friday, capping off months of political uncertainty.
An MSCI index of emerging-market Asian stocks rose 0.7%, while a gauge of Asean shares advanced for the fourth consecutive session to scale a near two-week high.
Dismal US jobs data sealed the case for an interest rate cut by the Fed next week, propping up stock markets. Market participants will now be tuned to Thursday's inflation report to gauge the scale of its easing.
Taiwan's equity benchmark index added 0.7% to scale a fresh record peak, while South Korea's Kospi index jumped to a four-week high. Indonesia's stocks advanced up to 0.9%.
Lower interest rates in the US make emerging markets attractive for foreign investors.
"There is now clearer evidence of deterioration in labour demand, not just supply," Bank of America analysts wrote, adding that they now expect two quarter-point cuts this year, in September and December respectively.
Traders have fully priced in a quarter-point rate cut by the Fed next week, with a 10% chance of a half-point cut, as per the CME FedWatch tool.
Stocks in Jakarta gained 0.9% on signs that a week-long violent unrest, sparked by government spending on perks for politicians and the death of a motorcycle taxi driver, showed signs of easing as protests turned peaceful over the weekend.
The rupiah appreciated 0.4% to a six-session high. Yields on its 10-year bonds slipped to 6.368%, driven by prospects of further interest rate cuts and fewer trade-related risks compared with India, the other high-yield market in Asia.
Thailand's benchmark index hit a nearly four-week high in the early hours on Monday, but pared gains by noon to trade around 0.2% higher, largely due to a 3% sell-off in the country's most valuable listed company, Delta Electronics Thailand.
Anutin Charnvirakul, a conservative politician, was elected as the prime minister with a promise of calling an election within four months. His appointment, along with economist Ekniti Nitithanprapas as the new finance minister, helped ease market concerns.
The baht inched higher to 31.980 per US dollar, its highest since July 2021, driven by a soft dollar, higher gold prices, and clarity on the political front.
"We expect that the baht would continue to receive support from both dollar softness and elevated gold prices," Maybank analysts wrote.
"We lean to the downside on USD-THB (dollar-baht), especially in light of US labour market weakness."
Malaysia's stocks rose 0.5% while its currency, the ringgit was anchored at last Friday's levels.
Taiwan's dollar appreciated 0.5% to a two-week high, while South Korea's won edged lower.
Source: theedgemalaysia