EMERGING MARKETS-Indonesia's rupiah gains on high bond yields; Asian FX steady after Fed hold

By Reuters News

By Roshan Thomas

- Indonesian equities pulled back on Thursday, while the rupiah firmed as benchmark 10-year bond yields hovered near a 6-year high and broader Asian currencies drew support from the Federal Reserve's decision to leave interest rates unchanged.

Indonesia's benchmark 10-year bond yield held at 7.707%, its highest since mid-May 2020. It is up more than 150 basis points this year, driven by rising oil prices and concerns over MSCI's proposed review of the country's market status.

Bank Indonesia delivered three rate hikes between May and June. It next meets in mid-November, with swaps markets signalling expectations of further policy tightening.

The elevated bond yields helped the rupiah pull away from the record lows it neared earlier this week.

Higher yields could support the rupiah by attracting foreign investors back into Indonesia's debt market and boosting capital inflows, said Fakhrul Fulvian, chief economist at Trimegah Sekuritas Indonesia.

Jakarta stocks .JKSE, among the worst-performing equity markets in the region this year, fell 2.5%.

"The MSCI classification decision is still a live threat, and President Prabowo Subianto's combative tone towards MSCI is not the signal global institutional investors want to see," said Inki Cho, senior financial market strategist at online trading platform Exness.

Elsewhere, Asian currencies broadly strengthened after the Fed's widely expected pause.

"The Fed's decision to hold rates removed the near-term rate hike threat that had been the dominant pressure on Asian FX through October, giving regional currencies room to breathe," Cho said.

The South Korean won and the Malaysian ringgit led regional gains, rising 0.5% and 0.3%, respectively. The Philippine peso climbed 0.1%, recovering from the record low of 64.171 per dollar touched on Tuesday.

Meanwhile, the MSCI gauge of emerging Asian equities .MIMS00000PUS fell more than 1%, dragged lower by the tech-heavy South Korean and Taiwanese benchmark indexes, which together account for more than half of the regional gauge.

Shares of Samsung Electronics 005930.KS fell 4.8% after the chipmaker reported earnings below analyst expectations, while Alphabet GOOGL.O dropped 10% in after-hours trading, wiping almost $400 billion off its market value on concerns over steep cash burn.

South Korean stocks .KS11 fall more than 2%, while Taiwan stocks .TWII lost 1.9%, with chip giant TSMC 2330.TW down over 1%.

Thai stocks .SETI fell 0.7% after the central bank left its key interest rate unchanged for a fourth consecutive meeting on Wednesday, in line with expectations. The baht inched 0.1% lower.

Investors now await policy decisions from the Bank of Japan and the European Central Bank, both widely expected to leave rates unchanged.


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Asia stock indexes and currencies at 0408 GMT

COUNTRY

FX RIC

FX DAILY %

FX YTD %

INDEX

STOCKS DAILY %

STOCKS YTD %

Japan

+0.10

-0.64

.N225

0.35

27.43

China

+0.07

+4.90

.SSEC

-0.93

-8.11

India

-0.04

-5.66

.NSEI

-0.05

-13.17

Indonesia

+0.39

-7.93

.JKSE

-2.59

-40.50

Malaysia

+0.30

-0.15

.KLSE

0.10

-3.85

Philippines

+0.13

-7.88

.PSI

0.84

-5.81

S.Korea

+0.49

+7.82

.KS11

-2.29

39.40

Singapore

+0.09

+0.41

.STI

0.24

16.46

Taiwan

-0.35

-3.37

.TWII

-1.93

59.27

Thailand

-0.07

-6.81

.SETI

-0.75

23.40


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