BANGKOK (Reuters): Asian equities rallied on Monday as China announced new measures to support its ailing markets, while currencies were struggling for direction, with the Thai baht leading declines after local data pointed to an economic growth slowdown.
Shanghai shares were up 1.1% after opening 5.1% higher, their biggest intraday jump since July 6, 2020. Equities in Jakarta and Singapore rose 0.3% and 1%, respectively.
Beijing announced a package of measures over the weekend to boost investor confidence, including halving the stamp duty on stock trading.
Separately, the China Securities Regulatory Commission said it would slow the pace of initial public offerings and further regulate major shareholders' stake reductions.
It also approved the launch of 37 retail funds. The supportive measures were needed as profits at China's industrial firms fell 6.7% in July from a year earlier, extending this year's slump to a seventh month.
Investors are now focussed on the official PMI data for August due later in the week, which is still expected to show activity is in the red.
"Given that there will be the latest official Manufacturing and Services PMIs data for China on Thursday, I think worse-than-expected data should boost more expectations of strong stimulus measures," said Poon Panichpibool, markets strategist, Krung Thai Bank.
The Thai Baht weakened 0.4% against the dollar, while the Malaysian ringgit slipped 0.2%. Data showed Thailand's employment in the second quarter rose 1.7% from a year earlier, slowing from a 2.4% increase in the previous three months.
"I don't think the Thai baht will depreciate sharply with somewhat subsided political uncertainty, there should be more foreign fund inflows into Thai capital markets especially the stock market which should support the baht," said Panichpibool.
US Federal Reserve Chair Jerome Powell said on Friday the central bank may need to raise interest rates further to cool still-too-high inflation while promising to "move with care" at the upcoming policy meetings.
Markets anticipate a 80.5% chance of the Fed standing pat next month, the CME FedWatch tool showed.
"The Asian countries, by and large, are done with their rate hike cycle. But the question is, how soon will they move into rate cuts," said Sim Moh Siong, FX strategist at Bank of Singapore.
"The answer is probably not that soon, because the Fed may still be at a risk of doing a bit more. In light of these external pressures, central banks are likely to be quite cautious. If the Fed has to do a bit more, it does mean that the Asian currencies may face pressures."
Markets will be closely looking out for a slew of data coming for the U.S. throughout the week for further cues, including ISM non-manufacturing and August unemployment data.
The South Korean won, Indian rupee and Singapore dollar edged up 1% higher against the U.S. dollar. Elsewhere, the Russian rouble slipped 0.8% while the Turkish lira was trading flat. - Reuters
