On 20 September 2024, emerging Asian stocks and currencies saw significant gains following a major rate cut by the US Federal Reserve. The Fed’s unexpected decision to lower rates by 50 basis points lifted the outlook for risky assets, generating optimism about the potential for a smooth US economic landing. The positive sentiment was further bolstered by lower-than-expected jobless claims in the US, encouraging investors to capitalise on opportunities in emerging Asian markets.
Singapore’s stock market hit a six-year high, while Thailand’s share index rose to an 11-month peak. The Thai baht, continuing its impressive run, appreciated for the ninth week in a row—a streak not witnessed since June 2020. Meanwhile, Malaysia’s ringgit became Asia’s strongest currency, reaching its highest level since March 2022, driven by strong domestic growth projections. Indonesia’s rupiah also gained momentum, appreciating by 1%, marking a 13-month high, though its stock index took a 2.1% hit. This decline was due to the removal of Barito Renewables from FTSE Russell’s indexes, which led to a 20% drop in the company’s value and negatively impacted the utilities and materials sectors.
For investors, the Fed’s rate cut has reignited interest in emerging Asian markets, prompting rallies in both stocks and currencies. Many investors are now keeping a close eye on potential future moves by the Fed, with a 40% chance of another 50-basis-point cut expected in November. Interestingly, this development is happening amidst a backdrop of diverse central bank policies across Asia. While some central banks are maintaining their current policies, others, given their unique economic conditions, are holding steady. This divergence adds a layer of complexity to the overall market dynamics.
On a global scale, the ripple effects of the Fed’s actions are being felt in different ways across Asia. Some central banks, such as Bank Indonesia and the Philippine central bank, had eased earlier in response to economic conditions. In contrast, India’s and Malaysia’s central banks have kept rates unchanged, citing concerns about inflation and financial stability. China’s People’s Bank of China (PBoC) also maintained its rates, even as the yuan reached a 16-year high. In response, state banks have been working to temper its appreciation. Meanwhile, Japan has opted to maintain steady interest rates, buoyed by a positive outlook on domestic consumption.
These diverse strategies from Asian central banks reflect the varying economic conditions across the region and highlight the complexity of the global financial landscape moving forward.
The recent actions of the US Federal Reserve have had a profound effect on emerging Asian markets, sparking rallies in both stocks and currencies. As central banks across the region navigate their own paths in response to global economic changes, the varied responses provide valuable insight into future financial strategies.
Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.
