Most Asian stocks and currencies traded lower on Wednesday, as investors fretted about uncertainties surrounding global trade and growth from back-and-forth U.S. tariff plans.
Malaysian stocks led the decline in equity markets, extending falls to a fifth day to hit a more than one-year low. The market has been the worst performer in the region this year, with a 9.5% drop.
Fears of an escalation in global trade war rose after U.S. President Donald Trump said he would raise tariffs on Canada metals to 50%.
Uncertainty around global trade policy will remain the key deterrent to global growth, inflation and monetary policy outlook and, in turn, influence capital flows around the world in the near term, United Overseas Bank (UOB) analysts said in a note.
These uncertainties weighed on Malaysia's foreign portfolio flows for the fifth straight month with outflows widening in February, UOB said.
Following the lead of Bangko Sentral ng Pilipinas, Bank Negara Malaysia kept its key interest rate unchanged last week, while Indonesia and Thailand have cut their policy rates this year.
"As such, risk-off sentiment will prevail with capital likely flowing to countries demonstrating macroeconomic stability, improvement in fiscal conditions, policy consistency and less vulnerability to Trump's tariff threats," UOB analysts said.
Jessica Amir, a market strategist at trading platform Moomoo Australia, said the current situation indicates that a repeat of the 2018 scenario could be seen and globally, markets need to downgrade earnings growth with a decline in stock valuations.
Shares in Manila and Thailand fell 0.2% and 1.9%, respectively. Stocks in Indonesia rose 1.6%, while those in Singapore traded 0.3% higher.
Taiwan rose nearly 1% and South Korean equities climbed 1.5%, both recovering some of the losses incurred in the previous session.
Overall, Asian stocks have been declining in 2025, with Thai shares down 16.8%. South Korea has gained 7.3% so far this year, outperforming its peers, while Singapore shares are trading 1.4% higher.
Malaysia's ringgit declined the most in the region, with a 0.5% loss, followed by the Thai baht and Indonesian rupiah. Singapore's dollar and the peso depreciated 0.2% and 0.1%, respectively.
Meanwhile, the dollar index languished near a five-month low as worries about the U.S. economy simmered. It is very plausible that the U.S. dollar would be pressured lower by potential rate cuts from the Federal Reserve and that would allow other currencies to move higher, Amir said.
Trump's tariffs could fan inflationary pressures, driving the Fed to deliver more cuts this year.
HIGHLIGHTS:
** Indonesia's January budget deficit at 0.1% of GDP as tax revenue drops
** Indonesia to impose anti-dumping import duty for nylon film from China, Thailand, Taiwan
** Thailand benefiting from trade war, minister says - Reuters
