Asian emerging market equities drifted lower on Thursday as U.S. President Donald Trump's new auto tariffs weighed on automakers in South Korea, while stocks in Southeast Asia hit a more than two-week high led by Malaysia and Singapore.
South Korean stocks declined 1%, dragged lower by sharp losses in Hyundai Motor and Kia Corp . Taiwan's benchmark hit an more than two-week low, with top contract chipmaker TSMC down 1.7%.
"Korea is the Emerging Asian economy that stands out in terms of its economic exposure to auto tariffs," analysts at Barclays said in a note.
"The economic impact of auto tariffs on Korea is likely to be much more visible than the steel and aluminium tariffs imposed on 12 March."
An MSCI gauge of Asian emerging market equities , in which Taiwan and South Korea hold roughly 35% weight, skidded to a more than one-week low. An index including Japan stocks also slipped 0.3%.
Late on Wednesday, Trump announced plans for long-promised 25% tariffs on automotive imports that are set to go into effect on April 2, escalating a global trade war that risks fuelling inflation.
Market participants are cautious of the broader impact of U.S. tariffs on Southeast Asia's trade-reliant economies.
"Compared to Trump 1.0, the ASEAN-6 countries face higher direct and indirect risks from tariffs under the current administration," DBS analysts wrote, referring to a group of countries that includes Malaysia, Indonesia, Singapore, and Thailand.
"While the direct impact could be via reciprocal tariff, the second derivative impact might be through slower growth in key trading partners, China and the U.S."
An MSCI index of ASEAN equities jumped to a more than two-week high, led by banks in Malaysia and Singapore, which account for roughly a fourth of the index. Malaysia's benchmark index jumped 0.7%, extending its rally into a third session.
Singapore stocks scaled a fresh all-time high briefly but stopped short of breaching the psychologically key level of 4,000 points.
In Indonesia, stocks were adrift following a near 4% surge the previous day on lingering worries about the country's long-term fiscal stability and growth prospects.
The benchmark fell 0.9% in early trade before changing course. The rupiah ticked lower to 16,555 per U.S. dollar, but remains not too far from the 1998 Asian Financial Crisis low it plunged to earlier in the week.
Though market participants remain doubtful of the stability in Indonesian assets, Poon Panichpibool, a markets strategist at Krung Thai Bank, said downbeat valuations and limited impact from U.S. tariffs lessen further downside risks.
"Once the stock market starts to stabilise and there is a sign of reversal in foreign fund flows, the rupiah could regain some strength," Panichpibool said.
Traders are also taking positions ahead of a long national holiday break in Indonesian markets starting Friday till April 7.
HIGHLIGHTS:
** Indonesia's 10-year benchmark yield slips to 7.080%
** Japan's Nikkei falls as autos lead losses on Trump's tariffs woes
** Auto industry rocked by Trump's 25% tariffs on US imports - Reuters
