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Emerging assets rise as won climbs

Oct 10 2016 09:45
Jung Park and Harry Suhartono

Jakarta - Emerging market assets rose after US data last week indicated the labour market is settling into a pace that will support the world’s largest economy. Mexico’s peso pared gains after Donald Trump and Hillary Clinton sparred in their second US presidential debate.

The MSCI Emerging Markets Currency Index rose 0.1% as of 08:39 after US Labour Department figures Friday showed payrolls climbed by 156 000, following a 167 000 rise in August that was more than previously estimated.

South Korea’s won was poised for its biggest gain in almost two weeks. Thailand’s baht headed for the longest stretch of losses this year and prices for the nation’s debt declined after the royal palace said the king’s condition was unstable. The rand strengthened 0.7%.

“Markets are off more heightened risk aversion,” said Vishnu Varathan, a senior economist at Mizuho Bank in Singapore. “I do not think there is real reason to go into the rally, because despite the non-farm payroll data, I do not think it has blown the prospect of December hike out of the water either.”

While the improving US outlook supported Asian assets, the increasing probability of a Federal Reserve rate hike tempered demand. The market-based odds of a December rate increase climbed to 64%on Friday, from 61% at the start of last week.

Currencies

The won gained 0.7%, set for its biggest gain since September 27, while Malaysia’s ringgit rose 0.3% to halt a three-day drop. Financial markets in Japan, Taiwan and Hong Kong were closed for holidays on Monday.

The baht fell 0.4% after the nation’s palace said Sunday doctors are closely monitoring Bhumibol Adulyadej’s condition. The 88-year old monarch’s health is closely watched as he is revered by many for what they say has been his unifying presence during a seven-decade reign.

Mexico’s peso climbed as much as 2%, before reducing its advance to 1.5%, following a weekend of unprecedented crisis in Trump’s campaign.

At the presidential debate, Trump dismissed his vulgar comments captured in a 2005 video as nothing more than “locker room talk” and tried to deflect from the issue by attacking Clinton over her email use and past accusations of sexual misconduct against her husband.

“Investors will put more attention toward the US election than the likely Fed rate increase later this year,” Jeffrosenberg Tan, director for investment strategy at PT Sinarmas Sekuritas in Jakarta.

“A Hillary Clinton presidency is viewed to be positive as it will provide less uncertainty and that’s good for emerging markets assets.”

Stocks

The MSCI Emerging Markets Index gained 0.1% after climbing 1.3% last week. Seven of 11 industry groups gained, led by materials stocks. South Korea’s Kospi index rose 0.1% as Naver rallied 3.4%. Shinhan Financial added 2.4%.

Samsung Electronics slid 1.9%. The company temporarily halted production of Note 7 smartphones following customer complaints about safety issues with replacement devices thought to be safe, said a person with direct knowledge of the matter.

China’s stocks rose, led by energy producers, as the nation’s financial markets reopened after week-long holidays. A gauge of property developers tumbled after a number of cities imposed curbs to cool surging home prices, while the yuan slumped the most since June. The Shanghai Composite Index added 1.2%.

India’s Sensex Index gained 0.2%, led by advances in metal producers before the release of the industrial production data for August later in the day. Tata Steel jumped 2% to highest intraday price since January 2015 after the Sunday Times reported the company may merge its European unit with Thyssenkrupp.

Thailand’s equities gauge tumbled 3%, the biggest decline in Asia. The Philippine Stock Exchange Index dropped 0.7%, while the Jakarta Composite Index slipped 0.1%.

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