Most Asian shares rose on Friday (Oct 14), although currencies were mixed, as investors digested red-hot US inflation data, with sentiment getting a boost from the likelihood of UK taking a U-turn on its tax policy and hopes of more stimulus from China.
Equities across the region climbed, tracking their US peers overnight, before slipping for a brief while, as investors sought to secure gains. Stocks in Malaysia, South Korea and the Philippines rose between 0.8% and 2.3%.
The governor of the People’s Bank of China said that it will step up monetary policy, and will offer stronger support to the real economy, ahead of the all-important Communist Party Congress on Sunday.
Additionally, market players kept an eye on the happenings in the UK, where the finance minister cut short his trip to Washington to work on the U-turn of the mini-budget that was announced in September that caused a rout in global markets earlier, Reuters cited.
However, the elevated headline inflation print in the US for September kept investors under check, reinforcing expectations that the US Federal Reserve (Fed) will continue on its path to hike rates, even at the cost of tipping the global economy into a recession.
“A hotter-than-expected inflationary print gives the Fed reason to continue to aggressively hike rates,” Jessica Amir, a market strategist from Saxo Capital Markets said, “A day’s worth of trading is not an indication of where the momentum is, and what the gloomy outlook is for interest rates.”
Markets participants are currently pricing in a 75-basis-point hike in the November meeting, with the likelihood of another outsized rate increase in December.
Among currencies, the Singapore dollar gained the most, firming about 0.6%, after its central bank tightened monetary policy as expected for the fourth time this year to combat inflation.
Additionally, the island nation reported stronger economic growth for the third quarter, which capped risks of falling into a recession, in the face of elevated price pressures.
“The USD/SGD has seen a sharp move lower on the more persistent inflation forecast, seemingly moving to retest a double top formation,” Yeap Jun Rong, a market strategist from IG Markets, said.
The Singapore dollar has been one of the better performing currencies of the year, barely falling about 5% against the greenback, while most of its other Asian counterparts logged double-digit losses.
Meanwhile, the South Korean won added 0.2%, while the Philippine peso gained 0.1%.
The ringgit remained one of the few outliers, falling about 0.2%. The Indonesian rupiah lost 0.2%, while the Indian rupee dropped 0.1%.
The ringgit has come under pressure for four straight days, in the face of political uncertainty after Malaysia’s Parliament was dissolved on Monday, a public holiday, paving way for the 15th general election. The election date has yet to be announced.
Markets in Thailand were closed for a public holiday on Friday.
