Shares in Asia’s emerging markets weakened on Thursday, with South Korean shares hit by weak economic growth, while the Malaysian ringgit approached its highest level in a month following the central bank’s recent decision to keep interest rates on hold.
The Asian emerging markets equity index (.MIMS00000PUS) fell 0.1%, wiping out earlier gains, as South Korean shares, which account for about 11% of the index, fell as much as 1.2%.
SK Hynix and Samsung Electronics were the biggest laggards in Korea’s benchmark index, with declines of 2.7% and 1.1%, respectively.
According to the data, East Asia’s economy barely grew in the fourth quarter of 2024, missing market expectations, as the country’s worst political crisis in decades took a toll on already weak domestic demand.
The South Korean won last traded at 1,437.30, a few pips from a five-week high reached on Wednesday. Analysts at Maybank highlighted “a lot of concerns” about the won despite its recent strength.
Besides political uncertainty, “there remains a risk that the BOK (Bank of Korea) will lower interest rates in the coming months given economic concerns,” they said.
Shares in China surged after Beijing announced new measures to boost its sluggish stock market. The blue-chip CSI300 index and the Shanghai Composite Index advanced 1.8% and 1.9% respectively, with both indexes hitting their highest levels since early January.
China accounts for more than a third of MSCI’s index of emerging Asian equities.
The dollar index was flat at 108.28, after falling from 109.34 on Monday – the sharpest one-day drop since November 2023 – as Trump’s first day in office brought a barrage of executive orders despite no tariffs. However, he threatened to impose heavier tariffs on a number of his trading partners.
“If he (Trump) follows through on his tariff threats against China, this could lead to renewed depreciation in Asian currencies,” said Lloyd Chan, senior currency analyst at MUFG Bank.
Malaysia’s ringgit USDMYR slipped, but continued to hover near a one-month high after its central bank held interest rates steady on Wednesday. Shares on the Kuala Lumpur BURSA fell 0.7%.
Indonesia COMPOSITE and Singapore shares jumped 0.6% and 0.5% respectively, while Jakarta shares strengthened for seven consecutive sessions.
Traders are awaiting the Monetary Authority of Singapore’s (MAS) first policy decision of 2025, due on Friday. Singapore’s core inflation rose 1.8% in December compared to a year earlier. This may lead MAS to a possible easing of FX policy on Friday, analysts at Barclays said in a note.
“We believe a 100bp reduction in slope is more likely than 50bp in the absence of refocusing.”
Traders are also looking forward to the Bank of Japan (BOJ) policy decision due on Friday. Markets are increasingly confident that the BOJ will raise its short-term policy rate on Friday by a quarter point to 0.5%.
Highlights:
** The 10-year Indonesian government bond yield (ID10YT=RR) fell to its lowest level in two weeks at 7.096%
** SK Hynix’s profit surpassed Samsung’s, but its shares slumped due to lower demand for memory chips
** Singapore forms an election committee, indicating that elections will be held soon
**Taiwan’s equity market is closed for a holiday
Source: Reuters
