EMERGING MARKETS-Asian FX set for half-year losses on rate hikes, inflation woes


By Harshita Swaminathan

June 30 (Reuters)All emerging Asian currencies were set for half-yearly losses on Thursday, with the South Korean won set to lose the most, as tightening policying by the US central bank and concerns over global economic outlook spurred selling in Asian assets.

The won KRW=KFTC dropped 8.4% so far this year, while the Philippine peso PHP= and Indian rupee INR=IN were on track to post half-yearly losses of 7.3% and 5.8%, respectively.

Emerging markets in the six-month period were battered by capital outflows due to the US Federal Reserve kicking off its tightening cycle, Russia’s invasion of Ukraine, and inflation from higher commodity prices.

Among local drivers, China’s insistence on a zero-COVID policy also spurred selling as the country’s repeated imposition of restrictions means a slower economic recovery for the region’s largest economy.

“The broader market … they need some more convincing because I think at the back of their mind, they’ve still got this hesitancy due to the ongoing zero COVID policy,” said Stephen Innes, managing partner at SPI Asset Management.

Nearly all stock markets in Asia were set for half-yearly losses, although markets in Indonesia .JKSE climbed 5.3%, with many coal miners seeing sharp gains amid soaring energy prices.

For the day, most Asian currencies weakened as even more hawkish signaling from the Fed and China’s weaker-than-expected factory and services data kept a lid on a sentiment investor.

The Indonesian rupiah IDR= shed 0.3%, and was set to lose 4.3% for the half year. The Thai baht THB=TH lost 0.2%, on track to drop 5.4% so far this year.

Fed Chair Jerome Powell said overnight there was a risk that the planned policy tightening might slow down the economy too much, as he reaffirmed the central bank’s commitment to fight inflation.

“The messaging reinforces the notion that the current economic landscape is operating in a higher rates environment,” analysts at Maybank said in a note.

However, the Singapore dollar SGD= edged up 0.2% and was set to be the best-performing Asian currency in the six-month period, losing just 3%.

Philippines’ incoming central bank governor said he would consider more aggressive rate hikes to support the local currency.

The country’s new president, the son and namesake of late dictator Ferdinand Marcos, also swore in.

The peso PHP= rose early in the trading day, but settled about 0.1% lower.

Stocks in the region traded mixed, with Philippine stocks .psi and Thai stocks .SETI shedding 2.3% and 0.8%, respectively, while Chinese .SSEC and Malaysian .KLSE rose 1.1% and 0.3%, respectively.

HIGHLIGHTS:

** Indonesian mining firms Bayan Resources BYAN.JK and Astrindo Nusantara Infrastruktur BIPI.JK more than doubled their market capitalisations this half-year

** International Monetary Fund says it had constructive and productive discussions with Sri Lankan authorities amid financial crisis, to reach agreement on fund facility arrangement in near term

** Japan factory output in May falls 7.2% month-on-month, the sharpest monthly drop since May 2020, well below expectations

Asia stock indexes and currencies at 0732 GMT

COUNTRY

FX RIC

FX DAILY %

FX YTD %

INDEX

STOCKS DAILY %

STOCKS YTD %

Japan

JPY=

+0.42

-15.39

.N225

-1.54

-8.33

China

CNY=CFXS

+0.07

-5.08

.SSEC

1.10

-6.63

India

INR=IN

+0.04

-5.83

.NSEI

0.02

-8.94

Indonesia

IDR=

-0.31

-4.33

.JKSE

-0.21

5.26

Malaysia

MYR=

-0.15

-5.46

.KLSE

0.31

-7.11

Philippines

PHP=

-0.09

-7.27

.psi

-2.34

-13.58

S.Korea

KRW=KFTC

+0.05

-8.44

.KS11

-1.91

-21.66

Singapore

SGD=

+0.20

-3.00

.STI

-0.67

-0.32

Taiwan

TWD=TP

-0.15

-6.85

.TWII

-2.72

-18.62

Thailand

THB=TH

-0.18

-5.42

.SETI

-0.81

-5.08

Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

Asian stock markets https://tmsnrt.rs/2zpUAr4

(Reporting by Harshita Swaminathan; Editing by Sherry Jacob-Phillips)

((Harshita.Swaminathan@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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