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EMERGING MARKETS-Asian stocks gain, yields ease on less-hawkish Fed comments

EMERGING MARKETS-Asian stocks gain, yields ease on less-hawkish Fed comments

Reuters · 07/28/2022 03:12
EMERGING MARKETS-Asian stocks gain, yields ease on less-hawkish Fed comments

Indonesia 10-year bond yield posts biggest daily fall since Jan

Mumbai stocks climb 1.5% to highest since May 5

Thailand markets closed for local holiday

By Harish Sridharan

- Currencies and stocks rose on Thursday, while yields fell in Asia's emerging markets, as less-hawkish-than-feared messaging from Fed Chair Jerome Powell allayed fears over the pace of U.S. rate hikes and curtailed safe-haven flows to the dollar.

Equities in Kuala Lumpur .KSLE, Seoul .KS11 and Manila .PSI gained more than 0.8% each. Shares in Mumbai .NSEI rose as much as 1.5% to hit their highest level since May 5.

The yield on Indonesia's benchmark bond ID10YT=RR fell 9.1 basis points to 7.323%, its steepest intraday percentage fall since January.

Overnight, the U.S. Federal Reserve hiked rates by a widely expected 75 basis points, sending U.S. Treasury yields lower.

Powell sounded suitably hawkish on curbing inflation in his conference, but also dropped guidance on the size of the rate hike and that "at some point" it would be appropriate to slow down.

As the United States pushes ahead with its steepest interest rate hikes in a generation, investors are unusually poised to buy in Asia's emerging markets, betting authorities can tame inflation without triggering the capital-flight chaos of previous cycles.

But with markets still unsure of the potential steps from the U.S. Fed, more clarity is before Asian currencies see a lasting respite, particularly as fears that more aggressive hikes might tip the U.S. economy into a recession. FEDWATCH

Despite losing 9% so far this year, the Korean won KRW=KFTC is set for its best session in a month. It has gained about 2% after hitting a 13-year low earlier this month.

The Indonesian rupiah IDR=, Singapore dollar SGD= and Malaysian ringgit MYR= also edged up against a soft dollar.

"In the short-term, there is a decent window for Asian markers to capitalise on the Fed's dovish hike," said Mitul Kotecha, head of EM strategy at TD Securities.

"But it certainly doesn't mean that we are going to see a rush-back of capital inflows. Nonetheless, we can expect the pace of outflows to slow."

Asian markets have seen substantial bond and equity outflows this year, with a surge in the U.S. yields and greenback making riskier assets less attractive.

A senior Indonesian finance ministry official said on Wednesday the central bank's operation to sell some of its government bond holdings has had limited impact on yields.

Analysts warned that large sales by Bank Indonesia could hit bond yields and spark further capital outflows from the debt market at a time when investors are wary of risk assets.

In other , Reuters reported that U.S. President Joe Biden and his Chinese counterpart Xi Jinping are expected to talk on Thursday, with Taiwan and Russia's invasion of Ukraine expected to be key agenda items.



HIGHLIGHTS

** Indonesia's palm oil exports gather pace after levy removal - official

** Philippine peso PHP= down 0.3%, bucks regional trend

** Hong Kong central bank raises rates, warns of tighter interbank market



Asia stock indexes and currencies at 0627 GMT

COUNTRY

FX RIC

FX DAILY %

FX YTD %

INDEX

STOCKS DAILY %

STOCKS YTD %

Japan

JPY=

+0.96

-14.91

.N225

0.36

-3.39

China

CNY=CFXS

+0.25

-5.76

.SSEC

0.29

-9.74

India

INR=IN

+0.20

-6.78

.NSEI

1.46

-2.70

Indonesia

IDR=

+0.33

-4.75

.JKSE

0.97

5.83

Malaysia

MYR=

+0.18

-6.38

.KLSE

0.83

-5.40

Philippines

PHP=

-0.39

-8.51

.PSI

1.36

-11.24

S.Korea

KRW=KFTC

+0.95

-8.62

.KS11

0.93

-18.12

Singapore

SGD=

+0.15

-2.30

.STI

0.38

2.99

Taiwan

TWD=TP

-0.01

-7.50

.TWII

-0.20

-18.26

Thailand

THB=TH

-

-9.34

.SETI

-

-4.90




(Reporting by Harish Sridharan in Bengaluru; Editing by Sherry Jacob-Phillips)

((Harish.Sridharan@thomsonreuters.com;))