Wednesday, October 5

S.Korea leads Asian shares higher with US CPI data in sight


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South Korea led Asian shares higher

Tuesday, as upbeat sentiment prevailed ahead of US inflation

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data that could determine the strength of the Federal Reserve’s

monetary tightening policy.

Seoul’s main share index, KOSPI, jumped 2.7% after

an weekend extended and was track for its best session since

February 2021, while shares in Shanghai rose as much as

0.5% to hit a three-week high.

“The outperformance in KOSPI is largely due to some catch-up

gains, which could be mirrored in the Chinese indices later as

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well, with further gains in Wall Street continuing to provide a

positive backdrop for the risk environment in the region,” said

Yeap Jun Rong, market strategist at IG.

Wall Street extended its winning streak overnight, partly on

hopes that the consumer price index data might signal that

inflation has peaked.

Interest rate futures imply a 90% chance that the Fed will

lift its benchmark interest rate by 75 basis points at next

week’s policy meeting – a position that is perhaps more

vulnerable to a downside CPI surprise than to unexpectedly

strong inflation.

On Tuesday, South Korea’s won strengthened 0.4%

to hit a one-week high. The yuan gained 0.1%, while

the Indonesia rupiah and Philippine peso dipped.

“Asian currencies have generally been following the broad

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dollar in the last few weeks, and that is likely to continue in

any market reaction to the US CPI numbers, said Alvin Tan,

head of Asia FX strategy at RBC Capital Markets.

The yen rose 0.2%, with talk of intervention from

Japanese officials supporting the sliding currency.

“If the yen moves quite sharply in the either direction from

hereon, the biggest impact will be on the Korean won, but it is

important to emphasize that it’s only one of several factors

that would drive the won,” Tan said.

The Indian rupee moved upward to hit its highest

level since mid-August, after the country on Monday reported the

annual retail inflation rate for August had accelerated to 7%,

putting more pressure on the monetary policy committee (MPC) of

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the central bank to raise interest rates again later this month.

“It’s clear that inflation remains uncomfortably high and

the data will do little to ease the concerns of several MPCs

members who continue to strike a relatively hawkish tone,” said

Capital Economics’ senior India economist, Shilan Shah.

He added that a 50 basis point hike to the repo rate

was likely in the next policy announcement, on

Sept. 30.

Shares in Mumbai rose 0.6%, while equities in

Jakarta and Taipei rose between 0.6% and 0.9%.

HIGHLIGHTS

** Indian rupee up 0.3%, hits highest since Aug. 11

** Yield on Indonesia’s 10-year benchmark bond

down to 7.134% – lowest since Sept. 2

** S.Korean won hits highest level since Sept. 6

Asia stock indexes and currencies at 0406 GMT

COUNTRY FX RIC FX FX FX YTD INDEX STOCK STOCKS

DAILY % S YTD %

% DAILY

%

Japan +0.22 -19.25 0.17 -0.70

China +0.10 -8.21 0.33 -10.08

India +0.32 -6.23 0.57 3.94

Indonesia -0.13 -4.10 0.89 11.20

Malaysia -0.08 -7.59 -0.97 -5.37

Philippines -0.14 -10.31 -0.56 -6.24

S.Korea +0.28 -13.66 2.66 -17.79

Singapore +0.01 -3.37 0.42 5.27

Taiwan -0.08 -10.37 0.58 -18.25

Thailand -0.10 -8.02 0.05 0.54

(Reporting by Harish Sridharan in Bengaluru; Editing by Bradley

Perrett)

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