Asia’s emerging stock markets jump on factory data

by Jonathan Adams
Stock markets in Taiwan

Stock markets in Taiwan, South Korea, and Thailand jumped more than 0.6% each, while gains across the rest of the region were capped at less than 0.5%

Asia’s emerging stock markets jumped on Thursday, supported by surveys showing higher production across factories in Asia last month, and the boost given to Wall Street by the U.S. government’s $2 trillion spending plan.

Stock markets in Taiwan, South Korea, and Thailand jumped more than 0.6% each, while gains across the rest of the region were capped at less than 0.5%.

With much of Asia Pacific on holiday on Friday, activity is somewhat muted, Jeffrey Halley, a senior market analyst for Asia Pacific at OANDA said.

The U.S. plan, outlined by President Joe Biden on Wednesday, follows the recent $1.9 trillion pandemic relief package, and if passed, would add further boost the economic recovery.

Uncertainty over the plan, however, kept elevated U.S. 10-year bond yields from pushing much higher and the dollar remained supported by the U.S. growth outlook. That weighed on Asia’s emerging currencies, which were trading flat to slightly lower.

The pressure on the region’s risk-sensitive currency and bond markets is unlikely to reduce, as the U.S. economy looks set to outpace the global recovery with aggressive coronavirus vaccination campaigns and cheap money likely to remain available for some time.

A poll by Reuters found that battered emerging markets currencies will only pare some of their recent steep losses over the coming year, with those analysts adding that the sell-off was likely in the next three months.

The rupiah, one of the highest yielders in emerging markets, fell as much as 0.5% before recovering slightly as trading went on.

Indonesia raised 15.02 trillion rupiah ($0.0010 trillion) from an additional bonds auction on Wednesday. Recent auctions have been weak due to higher U.S. yields driving capital away from emerging markets.

The amount of the latest conventional bonds sold was still below target. If there is no turnaround in bond market sentiment over the next few weeks, the government probably needs to embrace the higher funding costs, OCBC bank analysts said.

Sentiment was also supported by surveys showing Asia’s factories stepped up production in March.

Markets in the Philippines were closed. Most markets across Asia will be shut on Friday.

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