Asian shares extended their relief rally on Wednesday, with Taiwan and South Korea at the forefront, after a report the International Energy Agency has proposed the biggest-ever oil stock release to tame crude prices, amid the U.S.-Israel war on Iran.
The MSCI emerging markets stocks index rose 1.7%, adding to Tuesday's gains, while the EM currency index was little changed after its near-1% jump in the previous session.
Trump has repeatedly threatened to hit Iran hard over moves to stop the flow of energy supplies through the Strait of Hormuz, a chokepoint for about a fifth of global oil and liquefied natural gas supplies, with disruptions already hitting Asia's import-reliant economies.
The prospect of a record release of oil from IEA member nations' strategic reserves, as reported by the Wall Street Journal, offered investors some reassurance that authorities could act to cushion the energy shock and sent oil prices down slightly, while moves in currencies and bonds remained muted.
The U.S. dollar index dipped 0.2% as traders pared risk. Equities in South Korea rallied 3.8% to their highest in one week, but volumes were barely a fraction of the benchmark's 30-day average.
Taiwan's benchmark also advanced more than 4% to a near one-week high. Sharp rebounds in heavyweight chip stocks underpinned the gains, with Samsung Electronics and SK Hynix rising 2.5% and 3%, respectively, while Taiwan Semiconductor Manufacturing Co jumped more than 5% and was on course for its best session since early January.
Elsewhere in Asia, gains were more subdued, with Manila and Bangkok each rising about 1%, while Singapore, Jakarta and Kuala Lumpur were little changed.
CGS International's Deputy Head of Research Lim Siew Khee said dip-buying interest remains intact, but investors are becoming more cautious as the oil shock adds to existing concerns over sticky inflation, weak employment and stretched valuations.
She added that without a genuine resumption in oil supply, the rebound in risk assets could remain fragile rather than mark a sustained recovery.
Regional stocks and currencies have been whipsawed since the start of the Middle East conflict last month, erasing the strong gains incurred since the start of the year.
The MSCI emerging markets stocks index and the EM currency index shed 7% and 1.5%, respectively last week.
Net importers of oil, such as South Korea and Thailand, issued circuit breakers after suffering stock declines.
However, U.S. President Donald Trump's comments on the conflict ending soon was a breather for the assets in the region, with South Korea, Taiwan and Philippines recouping losses for a second session on Wednesday.
Currencies in the region largely traded range-bound, with Taiwan's dollar, Thai baht, and Singapore's dollar rising over 0.2%, while Malaysian ringgit, Indonesian rupiah, and the Indian rupee were little changed.
U.S. inflation data due later on Wednesday, along with India's inflation and export figures later in the week, are next on investors' radar.
HIGHLIGHTS:
** South Korea taking part in IEA discussion on oil reserves release
** BOJ to raise interest rates next quarter - POLL - Reuters
