Equities in emerging Asia advanced on Monday, led higher by stocks in Indonesia, Taiwan, and South Korea, as bleak US labor data boosted Federal Reserve rate cut hopes and easing regional political tensions supported demand for risk assets.
Thailand’s stocks jumped 0.9 percent in early trade and its currency, the baht, hit a more than four-year high, after the country elected a political veteran as its new prime minister on Friday, capping off months of political uncertainty.
An MSCI index of EM Asia stocks rose 0.7 percent, while a gauge of ASEAN shares advanced for the fourth consecutive session to scale a near two-week high.
Dismal US jobs data sealed the case for an interest rate cut by the Fed next week, propping up stock markets. Market participants will now be tuned to Thursday’s inflation report to gauge the scale of its easing.
Taiwan’s equity benchmark added 0.7 percent to scale a fresh record peak, while South Korea’s KOSPI index jumped to a four-week high. Indonesia’s stocks advanced up to 0.9 percent.
Lower interest rates in the US make emerging markets attractive for foreign investors.
“There is now clearer evidence of deterioration in labor demand, not just supply,” Bank of America analysts wrote, adding that they now expect two quarter-point cuts this year, in September and December.
Traders have fully priced in a quarter-point rate cut by the Federal Reserve next week, with a 10 percent chance of a half-point cut, as per the CME FedWatch tool.
