Most emerging Asian stock markets extended gains on Wednesday, led by South Korea and Taiwan, as expectations grew for a U.S. Federal Reserve interest rate cut next month.
The MSCI emerging Asia index rose 1% in its third straight session of gains as South Korean shares advanced 2.1% and Taiwan shares climbed 1.2%.
Bets have firmed over the past few sessions for a quarter-point Fed rate cut next month, driven by weak economic data and comments from central bank officials backing monetary easing.
Fed funds futures are pricing an implied 84.4% probability of a 25-basis-point cut at the U.S. central bank’s next meeting on December 10, compared to even odds a week earlier, according to the CME Group’s FedWatch tool.
Back in Asia, Malaysian and Singapore equities advanced 0.6% each, while Indonesian stocks gained 0.4%.
Shares in Manila and Bangkok were little unchanged. Most stock benchmarks are set to end the year with robust gains, driven by economic growth, monetary policy easing and renewed risk appetite, particularly for artificial intelligence-related stocks.
South Korea’s KOSPI index has jumped nearly 65% this year, making it the best performer in the region, while Indonesia, Singapore and Taiwan stocks have risen about 20% each.
“EM as an asset class has performed strongly this year as the direction of travel of U.S. rates matters more than the precise timing of when those cuts come,” said Matthew Culley, a portfolio manager at Janus Henderson emerging market team.
“While volatility can persist in the short term, the mid-term outlook for EM remains bright.”
Currencies were largely muted in the region, with the Thai baht, Singapore dollar, Philippine peso, Indonesian rupiah, and Malaysian ringgit showing little changes on the day.
The South Korean won rose 0.3% in its second straight session of gains. It had hit a more than seven-month low earlier this week.
The country’s finance minister vowed stern responses to excessive foreign exchange volatility as authorities closely monitor speculative trading and herd-like behaviour in the market.
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