Asian stocks gain on commodity rally; focus shifts to Powell speech

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Asian equities firmed on Tuesday, as

rising commodity prices fueled market expectations that global

economic recovery was gathering steam, while bond yields

remained elevated after the recent spike in U.S. Treasury

yields.

The Thai index led gains in the region, trading 1.7%

higher as its heavyweight energy stocks gained on rising crude

prices.

“The dip buyers are out in Asia, with U.S. futures all

tracking higher and Asia-Pacific equities riding the cyclical

upturn commodity wave,” said Jeffrey Halley, senior market

analyst at OANDA.

Focus turns towards U.S. Federal Reserve Chairman Jerome

Powell’s Congressional testimony due later in the day, where

comments on higher inflation outlook and rising yields will be

closely watched.

“Asia has probably seen the best of the intra-day rally now,

with the risks around the Powell testimony this evening likely

to temper exuberance.”

Longer-dated bond yields in the region remained high, with

yields on Indonesia’s 10-year bonds, generally seen

as a favorite in the region, rising as much as 9 basis points

to 6.754 – highest since mid-October.

Rising U.S. Treasury yields have dented the luster of Asia’s

high-yielding bond markets, while expectations of steeper

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borrowing costs and higher inflation also reduce the

attractiveness of emerging economies with less stable currencies

and public finances.

According to Refinitiv Lipper, emerging market bond funds

faced outflows for the first time in 21 weeks in the week ended

Feb. 17, with outflows of $689 million.

Higher bond yields also traditionally draw funds away from

equities by providing more secure long-term returns, and a

switch from high-flying tech stocks in particular has been at

the heart of a recent halt in global stock markets’ long rally.

Most Asian emerging currencies strengthened as the U.S.

dollar hit a six-week low.

The Indian rupee strengthened to 72.333 per dollar.

It has risen continuously for the last three months, and is up

nearly 1% so far in February, as India’s economic outlook

brightened amid a drop in COVID-19 cases.

Analysts in Bank of America Merrill Lynch said in a note

that while high FX reserves would shield the rupee from rising

oil prices, an increase of $10 per barrel could potentially

reduce consumption demand by 0.4% of gross domestic product.

India imports almost all of its oil.

“We continue to expect an oil tax cut to soften retail

prices. A relief is that this can be funded by the Reserve Bank

of India’s Open Market Operations as the higher oil import bill

will cut FX intervention,” the BofA analysts wrote.

HIGHLIGHTS:

** Top gainers on Thailand’s SETI include Group

Lease PCL and TWZ Corporation PCL that rose

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28.57% and 14.29%, respectively.

** Top gainers on FTSE Bursa Malaysia Kl Index

include Genting Malaysia Bhd up 3.99% and Genting Bhd

up 3.79%.

** Indian shares on track to snap five straight sessions of

losses.

Asia stock indexes and

currencies at 0704 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCK

DAILY YTD % X DAILY S YTD

% % %

China EC>

India +0.22 +1.00 <.ns ei>

Indones +0.04 -0.46 <.jk ia se>

Malaysi -0.10 -0.59 <.kl a se>

Philipp -0.06 -1.40 <.ps ines i>

S.Korea 11>

Singapo +0.07 +0.04 <.st re i>

Taiwan +1.60 +2.13 <.tw ii>

Thailan +0.07 -0.17 <.se d ti>

(Reporting by Rashmi Ashok in Bengaluru; additional reporting

by Patturaja Murugaboopathy; Editing by Patrick Graham and

Sherry Jacob-Phillips)

In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

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