South Korea led Asian shares higher
Tuesday, as upbeat sentiment prevailed ahead of US inflation
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
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
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
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
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
Shares in Mumbai rose 0.6%, while equities in
Jakarta and Taipei rose between 0.6% and 0.9%.
** 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 %
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