Most Asian stocks rose on Tuesday as traders positioned for a potential U.S. Federal Reserve interest rate cut this month, though political uncertainties in Southeast Asia's two largest economies kept risk sentiment in check.
Stocks in Indonesia, Southeast Asia's biggest economy, rose 1.3% in their biggest intraday percentage gain in three weeks, climbing for the first time since thousands of demonstrators clashed with police outside the House of Representatives late last week.
The benchmark index had lost 1.6% by Monday's close since widespread protests against controversial election law changes began a week ago.
Bank Indonesia's interventions in the currency market helped the Jakarta Composite cut its losses, according to Philip Wee, a senior FX strategist at DBS. The rupiah traded almost flat on Tuesday, last up 0.1%.
"Still, investors are looking beyond rhetoric for policy credibility and reform momentum to anchor long-term capital," he said.
South Korean shares rose 0.9% after data showed that consumer inflation slowed in August. The won strengthened 0.3%.
In Thailand, the region's second-biggest economy, the baht traded largely flat, last down 0.1%, and equities advanced 0.4%. Thailand's political crisis deepened after the Constitutional Court dismissed Prime Minister Paetongtarn Shinawatra on Friday for ethics violations. The Thai Constitutional Court's decision may have brought relief and closure, Wee said.
"This year, the THB has been less vulnerable to political premium pricing, cushioned by a persistent current account surplus, record foreign reserves, and broad-based USD weakness tied to Fed rate-cut expectations," he said.
Singapore equities rose 0.5%, while shares in both Kuala Lumpur and Manila cut earlier losses to trade 0.2% lower.
Among currencies, the Philippine peso led losses, falling 0.27% as August manufacturing data showed sustained weakness.
S&P Global data showed manufacturing growth slowed to its weakest pace in two months in August, with factory activity reflecting weak increases in production and new orders as higher U.S. tariffs began affecting demand.
The Singapore dollar, Malaysian ringgit, and Indian rupee traded largely flat. The dollar index snapped a five-session losing streak to rise 0.5%, with investors bracing for a crucial three-week gauntlet of employment figures, inflation readings and the Fed's rate decision.
Markets price in an 89% chance of a 25-basis-point rate cut later this month.
In Malaysia, the central bank is widely expected to hold rates steady at 2.75% on Thursday, according to a Reuters poll.
Locally, investors await key inflation data from Malaysia, Taiwan, Vietnam, Thailand and the Philippines later this week.
HIGHLIGHTS:
** Thai foreign visitors drop 7.16% y/y in first 8 months
** Japan PM to ask ministers to compile economic package - Reuters
