Asian equities rise as China data lifts sentiment, FX mixed

BENGALURU (Sept 15): Major Asian equity markets rallied on Friday while emerging currencies were mixed, after market-beating economic data from China added to expectations that global central banks were close to being done with their tightening cycles.

The yuan was the top gainer among emerging currencies in Asia, adding 0.1% to hit a two-week high against the US dollar, following weeks of depreciation, while Chinese stocks erased earlier gains to fall 0.6%.

China’s industrial production and retail sales data beat estimates, with the upbeat figures suggesting signs of an economic recovery.

“The improvement in August industrial production and retail sales is encouraging, with recent data pointing to some stabilisation in economic activities, which shall set a floor to yuan interest rates,” OCBC analysts said.

Indonesia’s stock market added 0.4%, hitting an over one-week high, while shares in the Philippines fell 0.6%.

The peso fell 0.4% to its lowest in over a week.

Betty Wang, senior economist at ANZ, said she expects the Philippine central bank to keep the policy rate on hold at its next policy meeting.

“However, it will continue to maintain its hawkish stand and stress its readiness to act if inflationary pressures intensify,” Wang added.

Stocks in Seoul jumped 1.1%, tracking a strong overnight Wall Street finish, to hit their highest in over a month, while the Singapore stock market gained 0.9%, its highest since Aug 11.

Indonesia released bullish trade surplus data of US$3.12 billion in August, roughly double of what was expected.

Despite the positive news, Indonesia’s policymakers must remain cautious about currency volatility, given expectations of a current account deficit and with US Treasury yields rising, said Trimegah Economist Fakhrul Fulvian.

“We need to ready for further depreciation of the rupiah.”

The rupiah was down 0.1%.

The country’s central bank is set to decide on its policy rate next Thursday, with Barclays analysts noting the risk of a rate hike to defend the currency.

The US dollar index, measuring its value against a basket of major currencies, last stood at 105.21, below Thursday’s six-month peak of 105.43.

China’s central bank rolled out a raft of measures to defend the yuan. It, however, cut the reserve requirement ratio for all banks on Thursday for the second time this year, boosting liquidity while reducing yields on the currency.