Asian stocks extend $3.4 trillion global rebound as ringgit soars and oil rebounds, STI up 1.3%

Pedestrians in front of the Tokyo Stock Exchange on Sept 30.
Pedestrians in front of the Tokyo Stock Exchange on Sept 30. PHOTO: AFP

HONG KONG (BLOOMBERG) - Asian stocks rose on Friday (Oct 9), extending a global equity rally, and Malaysia's ringgit headed for its best week since 1998 as investors piled back into riskier assets amid speculation the Federal Reserve won't be raising interest rates until risks from outside the US subside.

About US$2.46 trillion (S$3.44 trillion) has been added to the value of global stocks in the first four days of this week, as emerging-market equities surged. An MSCI gauge of developing-economy stocks is set for its best week in almost four years as the Hang Seng China Enterprises Index heads towards a gain of more than 8 per cent across five days. The ringgit and Indonesia's rupiah both gained more than 6 per cent since last Friday, sending the Bloomberg JP Morgan Asia Dollar Index toward a two-month high.

"This looks like a sustainable turnaround," Mr Michael McCarthy, chief market strategist in Sydney at CMC Markets, said by phone. "Investors have become less pessimistic. Things are definitely not in a strong economic environment but there is an expectation of further central bank support."

The MSCI Asia Pacific Index rose 1.5 per cent by 11.09am in Tokyo, erasing a 0.4 per cent drop on Thursday to be headed for a 5.2 per cent gain this week. That is the biggest jump since December 2011.

The MSCI Emerging Markets Index climbed 1.2 per cent on Friday, led by a 2.3 per cent rally in the gauge of Chinese shares in Hong Kong. The Shanghai Composite Index climbed 0.3 per cent on Friday after a 3 per cent advance on Thursday, its first day of trading after a week-long holiday.

The Straits Times Index was trading up 1.31 per cent at 2,985.67 as of 10.33am.

Japan's Topix index jumped 1.3 per cent, bringing its advance in the week to 3.9 per cent, the first weekly increase since mid-September. In Australia, the S&P/ASX 200 Index gained 0.9 per cent, set for a weekly climb of 4.1 per cent, the most since February.

Global stocks are staging a comeback in the wake of their worst quarter since 2011 as signs of an uneven recovery in the US job market and data indicating slowing growth from China and Japan to Germany and the UK spur stimulus bets. With futures trading putting the odds the Fed will raise rates this year below 40 per cent, Nobel prize-winning economist Joseph Stiglitz said he hopes rates do not rise because America's "anemic" recovery needs continued support.

Oil's rebound has also underpinned equity gains, amid speculation demand is picking up and as tensions in the Middle East increased.

Futures on the Standard & Poor's 500 Index were little changed after the index rose a second day in New York, closing above 2,000 points for the first time since Aug 20. Energy producers drove the advance, climbing 1.9 per cent as West Texas Intermediate crude briefly rose to as high as US$50.07 a barrel.

Emerging-market currencies headed for their biggest weekly gain in more than six years. Indonesia's rupiah, Russia's rouble and Malaysia's ringgit were the world's best performers with gains of more than 6 per cent versus the US dollar this week.

A Bloomberg index tracking 20 developing-nation currencies climbed 3.1 per cent this week, recovering from its biggest quarterly loss since 2011.

But Pacific Investment Management Co, which oversees US$1.52 trillion of assets, said on Thursday it expects emerging-market currencies to come under renewed pressure and favours investments that will profit from their depreciation.

The Fed noted that the greenback had "strongly appreciated" against emerging market currencies and those of commodity exporters, according to the minutes. An appreciating dollar tends to restrain the US economy by making American products more expensive abroad, while keeping down inflation by making imports less costly.

Odds of the Fed boosting rates from near zero at its meeting this month are at 10 per cent, according to Fed funds futures, while the chance of a move in December is holding at 38.8 per cent, down from 59.9 per cent a month ago. Many economists, however, are heeding comments from Fed officials including chairman Janet Yellen, who have touted the possibility of a rate rise before the year is out since the Sept 17 decision.

"The latest minutes clearly suggest that international factors are an unusually large determinant of US policy deliberations," Mr Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about US$21 billion, wrote in an e-mail to clients. "This, combined with the weak September US nonfarm payrolls report, indicate that the hurdle for a US rate hike has increased further, which was music to the ears of investors."

The ringgit strengthened 2.3 per cent to 4.1405 per dollar, set for a weekly surge of 6.2 per cent, the most since 1998. Malaysia is the Asian region's only major oil exporter and the currency tends to move in line with crude prices.

"The strong rise in the ringgit is on the back of the rally we've seen in oil prices," said Mr Khoon Goh, a senior strategist at Australia & New Zealand Group Ltd. in Singapore. "The US dollar was weaker on the back of the Fed minutes, which were read as dovish by the market, and this also helped the move in the ringgit."

The rupiah gained 2.9 per cent, with the currency headed for a 7.9 per cent surge in the week, the best performance among its Asian peers.

Gold for immediate delivery gained 0.3 per cent to US$1,142.80 an ounce, leaving it up 0.3 per cent in the week, following last week's 0.7 per cent decline. Fed inaction is positive for the precious metal as higher rates would curb the allure of assets which do not pay interest.