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Singapore - Emerging-market stocks rose to an 11-month high and currencies strengthened on signs the US and Japan will continue to reinforce their economies, buoying demand for riskier developing-nation assets.
The MSCI Emerging Markets Index climbed the most in a week before the conclusion of a Federal Reserve review where interest rates are expected to be left on hold and a Bank of Japan meeting on Friday, at which economists are forecasting an easing of policy.
Indonesia led stock and currency gains as Sri Mulyani Indrawati, a managing director at the World Bank, was named as finance minister. Chinese equities fell on a report regulators may set a limit on the amount wealth-management products can invest in stocks.
While Japan’s central bank is expected to ease this week, there’s speculation Governor Haruhiko Kuroda will double down on some or all of his policy tools in a bid to jolt his country out of what he calls its "deflationary mind-set."
A bigger-than-anticipated injection of stimulus would give an extra boost to emerging-market assets that have rallied on signs developed nations will act to support growth in response to Britain’s vote to leave the European Union.
"The stock markets are not doing that badly, so overall people will see bids on Asian assets," supporting the region’s currencies, said Sook Mei Leong, Southeast Asian head of global markets research at Bank of Tokyo-Mitsubishi UFJ in Singapore. "Everybody is still cautious and waiting for the FOMC."
Japanese Prime Minister Shinzo Abe announced plans on Wednesday for more than ¥28trn ($265bn) of economic stimulus, Kyodo News reported. In the US, futures contracts are showing just a one-in-ten chance of a rate increase on Wednesday and a 49% likelihood before the end of the year.
Indrawati’s return
The Jakarta Composite Index rose 1.2% as of 1:13 p.m. in the city, on course for the highest close in 14 months. The rupiah strengthened 0.3% and the yield on the nation’s 10-year bonds fell seven basis points to 7.04%.
Indrawati, who served as finance chief from 2005 to 2010 before departing for the World Bank, was reappointed to the role as part of a cabinet reshuffle. In other major changes, Luhut Panjaitan became Coordinating Minister for Maritime Affairs and Bambang Brodjonegoro, the former finance head, was shifted to the national planning portfolio.
"Sri Mulyani’s appointment is a total surprise," said Indra Mawira, an investment manager at Panin Asset Management in Jakarta. "She would only want to take that job if she got a blanket protection from the very top that she could do whatever she wants and that’s good for the market."
Stocks
The MSCI emerging stocks gauge rose 0.2%, taking its advance in July to 4.6% and putting it on track for the best monthly performance since March. Information technology shares led gains, with Asian suppliers of Apple Inc. rising after the iphone-maker reported sales figures that beat estimates. Taiwan’s Hon Hai Precision Industry climbed 1.4%.
Thailand’s SET Index rose 0.6% and the Philippines benchmark gauge were up 0.6%. Taiwan’s Taiex measure increased 0.3%.
Chinese stocks slumped after a report in the 21st Century Business Herald that the country’s banking regulator is considering tightening curbs on the $3.6trn market for wealth management products. The Shanghai Composite Index fell 2.3% the most in six weeks.
Currencies, bonds
The MSCI Emerging Currency Index rose 0.1% after declining 0.4% over the previous three days. Turkey’s lira strengthened 0.3% and Taiwan’s dollar advanced 0.2%. A gauge of the greenback against major peers climbed 0.2%. China’s central bank raised the yuan’s fixing by 0.16%.
Malaysia’s ringgit was the biggest emerging-market decliner, falling 0.4% as Brent crude declined and amid lingering concern over several international probes into alleged wrongdoing at state fund 1Malaysia Development.
The country’s sovereign bonds fell, pushing the 10-year yield up 11 basis points to 3.62%. That on similar-maturity Thai notes rose four basis points to 2.08%.
