MOST emerging Asian equities rebounded on Thursday, following the release of cooler U.S. inflation data for February, although the threat of an escalating global trade war continues to loom in the background.
The MSCI's gauge for emerging Asian equities rose as much as 0.5% in the day, rebounding from a 0.4% drop at close on Wednesday.
Data from the U.S. showed that consumer prices increased less than expected in February, but investors fret that the improvement is likely temporary against the backdrop of aggressive tariffs on imports that are expected to raise the costs of most goods in the months ahead.
However, the positive sentiment from the cooling U.S. inflation print supported a rebound in both emerging Asia stocks and currencies, according to Poon Panichpibool, market strategist at Krung Thai Bank.
Stocks in Kuala Lumpur rose the most, advancing as much as 1.5% and snapping a five-session losing streak, while Thai equities climbed nearly 1%.
However, as April approaches, concerns over reciprocal tariffs have surfaced, with U.S. President Donald Trump continuing to impose tariffs on neighbouring countries.
This could potentially have a negative spell on assets in emerging Asia, Poon warned. "Countries such as India, Thailand, Philippines ... collect higher tariffs from the U.S. when we compare to what the U.S. collects from them ... we could definitely face reciprocal tariffs for sure, which could be quite negative for EM Asia," he said.
Stocks in Indonesia were an outlier on Thursday, falling as much as 0.7% in early trade. A few large banks, including Bank Mandiri (Persero) and Bank Rakyat Indonesia (Persero), pulled the benchmark lower in early trade.
A nearly 30% drop in Indonesian government revenues in January, which comes as President Prabowo Subianto implements big spending plans, has raised market concerns about fiscal sustainability and a potential jump in borrowing.
Currencies in emerging Asia strengthened, with the Indian rupee, the Indonesian rupiah and the Philippine peso rising around 0.2% each.
A rise in global trade tensions and worries over U.S. recession risks have rattled global markets and sparked huge volatility in the foreign exchange market, as traders seesaw between relief and angst over Trump's whipsawing policy changes. - Reuters
