Emerging Asian currencies, equities drop

by Jonathan Adams
Asian currencies

The ringgit in Malaysia dropped 0.8 per cent, the South Korean won declined 0.8 per cent, and the Indonesian rupiah eased 0.5 per cent

Emerging Asian currencies and equities dropped on Tuesday, with South Korea’s stocks and the won leading the losses against a rising U.S. dollar, as the rally over interest rates faded.

The ringgit in Malaysia dropped 0.8 per cent and the share market in Kuala Lumpur slipped 0.3 per cent.

The country’s industrial production in September dropped 0.5 per cent from a year ago, more than expected, government data showed on Tuesday.

Bank Negara Malaysia at its last policy meeting held interest rates stable unlike the Philippines and Indonesia.

We continue to expect no further policy rate hikes (in Malaysia) – and with the policy rate not obviously restrictive, we don’t expect cuts either, even in 2024, said analysts at Barclays.

The South Korean won declined 0.8 per cent against the dollar, snapping a three-day winning streak, while stocks in Seoul were 2.3 per cent lower after four successive sessions of gains.

On Sunday, South Korea re-imposed a ban on short-selling shares, at least until June, starting Monday. The ban had helped shares to rally.

Korean stocks were the underperformers today, with some of the initial enthusiasm from the extension of the short-selling ban appearing to wear off today, said Tim Waterer, market analyst at KCM Trade.

So, in some respects, the Kospi was giving back some of Monday’s impressive gains with traders in a more circumspect mode today, Waterer said.

Analysts at Citi expect “tight liquidity” conditions to persist in Q4 in South Korea.

Elsewhere, the Indonesian rupiah eased 0.5 per cent. Stocks in Jakarta dropped 0.8 per cent.

Indonesia on Monday reported solid economic growth in Q3, although its pace eased more than expected to its weakest in two years.

Recent rupiah stabilisation reduces the need for another Bank Indonesia rate hike in the near term, which now seems more likely to materialise in Q1 2024, though this is a close call, Barclays analysts said in a note.

The rupiah’s depreciation has slowed over the past two weeks, with the currency strengthening back to early October levels after the Fed meeting on November 1, said Maybank in a note.

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