BANGKOK: Emerging Asian stocks rose on Thursday, with benchmark indexes in Taiwan and India hitting record highs, while most currencies in the region retreated after hawkish Federal Reserve minutes prompted investors to push back bets of rate cuts this year.
Market participants were also cautious as China's military started two days of "punishment" drills held in five areas around Taiwan just days after new Taiwan President Lai Ching-te took office.
The Chinese yuan declined marginally but touched lowest level since late April. Equities in China also hit lowest level since late April, declining as much as 1.5%.
Taiwan stocks rose up to 0.5%, after AI chip leader Nvidia forecast quarterly revenue above estimates on Wednesday.
MSCI's index of Asia Pacific IT stocks excluding Japan rose over 1% to hit a more than two-year high following Nvidia's results.
Shares in India rose more than 1% during the day on hopes of an improvement in the country's fiscal deficit after the central bank declared hefty dividend to the government.
Stocks in Malaysia rose as much as 0.7% to touch a more than three-year high, while those in the Philippines climbed 0.8%.
Fed officials at their April 30-May 1 session indicated they still had faith that price pressures would ease, if only slowly, but the meeting minutes also reflected discussion of possible tightening.
"Outlook for Asian currencies is muted given that the Fed is set to keep rates higher for longer, but it's less challenging now," said Wei Liang Chang, a macro strategist (FX and credit) at DBS Bank.
"We are settling back into more rangebound environment for Asian currencies."
Most Asian currencies declined with MSCI's emerging market currency index touching lowest level in a week.
Malaysia's ringgit retreated 0.4% while the Thai baht fell 0.3%.
The Bank of Korea (BoK) held interest rates at a 15-year high and reiterated risks around inflationary pressures in the wake of stronger-than-expected economic growth.
"Given the increasing upside risks to inflation, the BoK's stance will remain hawkish for some time. We maintain our view that the first rate cut is likely to come in October," analysts at ING wrote.
Bank Indonesia kept interest rates unchanged on Wednesday and reiterated that the current benchmark level is likely enough to keep inflation in check and the rupiah currency stable.
Singapore's economy grew 2.7% year-on-year in the first quarter of 2024, the quickest pace in 18 months, data showed.
The country's key consumer price guage for April came in line with economist's forecast. Equities in the country climbed 0.3% while the Singapore dollar was largely unchanged.
HIGHLIGHTS:
** Japan's factory activity expands for first time in a year, PMI shows
** South Korea announces $19 bln support package for chip industry
** Indian stocks to scale new peaks, rising over 8% this year - poll - Reuters
