Emerging Asian equities rose on Friday and were headed for their best week in more than a decade, as investors returned to risk assets after the U.S.-Iran ceasefire deal, although questions over its durability remained an overhang on stocks.
The MSCI gauge of EM Asia equities was up 1.2% on the day, poised for a weekly gain of about 8% - its best since early December 2011.
The broader index for global EM stocks was set for its best week since early June 2020 with a more than 7% gain, helped by a 1% rise on Friday.
Markets rallied this week after U.S. President Donald Trump agreed to a two-week ceasefire with Iran, including plans to reopen the Strait of Hormuz, which typically handles about one-fifth of global oil shipments.
However, investors remained on edge over the fragility of the ceasefire deal as traffic through the strait remained constrained, as Tehran asserted its control over the vital oil artery and Israel launched attacks on Lebanon.
"In emerging Asia, the negative effect so far could be more pervasive than in other geographies, and we believe that the region is unlikely to escape at least some lasting economic drag from persistent supply constraints," Barclays analysts said in a note.
"The economic scarring from the attacks on energy facilities and ports in Iran, as well as other Gulf nations, could continue to keep supply under stress in Emerging Asia."
On the day, Indonesia's Jakarta Composite index rose 2%, driven by a 13% gain in petrochemical producer Chandra Asri. It has gained more than 6% so far this week, heading for its first weekly rise in seven.
South Korea's KOSPI advanced 1.7% and the won weakened to 1,478.2 per U.S. dollar after the central bank kept its policy interest rate unchanged. The Bank of Korea warned of a highly uncertain path ahead as a broadening conflict in the Middle East threatens to derail growth and worsen inflation.
In Southeast Asia, stock benchmarks in Kuala Lumpur, Manila and Singapore rose between 0.2% and 0.3%.
Thailand shares extended gains to a fourth consecutive day, rising 0.8% to hover near a six-week high.
Among Asian currencies, the ringgit rose 0.5%, retaining the crown for the best-performing currency in the region with a gain of 2.4% so far this year.
On the other hand, the rupiah slipped further and hit a record low of 17,120 per dollar, set for a weekly loss of around 0.7%.
HIGHLIGHTS:
** Asia Pacific faces weaker growth and higher inflation from Middle East crisis, ADB warns
** Vietnam central bank to hold rates, urges banks to cut lending costs
** India to grow at 6.6% in FY27, says World Bank; risks from West Asia crisis persist - Reuters
