Hike rates

Asian stocks, currencies extend losses; Central banks in the Philippines and Indonesia hike rates

(17 Nov): Most Asian stocks and currencies extended losses on Thursday (17 Nov) as stronger-than-expected U.S. retail sales data bolstered the dollar overnight, while central banks Philippines and Indonesia raised interest rates as expected.

U.S. retail sales rose more than expected in October, indicating consumer spending picked up early in the fourth quarter — a factor that could eventually influence the Federal Reserve and its future pace of policy tightening.

The South Korean won fell 1.5% and was on track for its biggest drop in a month. The Thai baht and Malaysian ringgit lost nearly 0.2% each.

“The tug of war between inflation and recession fears continues… It appears the outlook for global growth is set for a more dramatic slowdown in 2023 as many central banks prioritize tackling inflation rather than supporting growth,” the OCBC analysts wrote.

The central bank of the Philippines announced a massive hike of 75 basis points (bp) and indicated to maintain its hawkish position to fight inflation. The peso reversed course to gain 0.1%.

“BSP (Bangko Sentral ng Pilipinas) hiked rates as expected, with the central bank raising its key rates by 75 basis points. offloading another big rate hike while refraining from an emergency rate hike,” said Nicholas Mapa, senior economist at ING.

“We expect BSP to remain hawkish through 2023, likely matching any Fed moves from now on.”

The Indonesian rupiah remained unchanged, losing almost 0.5% amid general market weakness, and was on course for its biggest daily decline in more than a month, despite the third consecutive rise in rates. 50bp by Bank Indonesia.

Most regional stock markets were mixed, with South Korean stocks falling 1%, while shares in Manila and Indonesia jumped 0.4% and 0.2%, respectively. Malaysia’s benchmark and Thai equities fell more than 0.3% each.

The declines came as the Bank of Thailand forecast the economy to reach pre-pandemic levels around late 2022 or early 2023. In addition, a Reuters poll separately predicted the economy grew at its fastest pace in more than a year last quarter.

Another one Reuters A poll found that short bets on major Asian currencies had declined on hopes that the region’s economic outlook would benefit from the easing of Covid-19 restrictions in China and that the Fed would moderate its rate hikes.