Asian currencies, stocks mixed on recession worries

Emerging Asian stocks were mixed on Thursday over fears of a global economic slowdown and the prospect of aggressive interest rate hikes by the U.S. Federal Reserve, while Thailand's baht and the Philippine peso led gains among the region's currencies.

Equities in Jakarta COMPOSITE declined 1%, while Singapore's benchmark index STI advanced 0.4% and stocks in Mumbai NIFTY ticked up 0.1%.

South Korea's benchmark index KOSPI, which has fallen 20.5% so far this year, retreated 0.7%.

"Asian equities will be fighting three battles simultaneously in 2023 – troublesome inflation, slowing growth and concerns over their foreign exchange reserves," analysts at Jefferies said in a note.

Markets are keenly watching out for U.S. inflation data next week and the policy-setting Federal Open Market Committee meeting, when the Fed is likely to announce a half-percentage point hike, with just 9% odds for another 75 bps increase.

The two-day meeting will begin on Dec. 13.

Among Southeast Asian currencies, the baht USDTHB rose 0.4% and the peso USDPHP advanced 0.2% after inflation data from the two countries this week raised the probability of more interest rate rises by their central banks to bring down soaring prices.

Annual inflation in the archipelago, which accelerated to 8% in November from a year earlier, bolstered the case for a 50 basis point (bps) hike by the Bangko Sentral ng Pilipinas at its upcoming Dec. 15 meeting.

On Wednesday, data showed Thailand's headline CPI rose by 5.55% in November from a year earlier, marking its slowest pace in seven months although way above the central bank's target range of 1% to 3%.

The Bank of Thailand (BoT) has raised rates by a total of 75 bps since August, including the latest 25 bp hike in late-November.

"We continue to expect the BoT to continue hiking policy rates in 25bp increments until the policy rate reaches a terminal rate of 2.5% in Q3 next year," analysts at Goldman Sachs said in a note.

Singapore's dollar USDSGD and Malaysia's ringgit USDMYR weakened 0.1% and 0.2%, respectively. Indonesia's rupiah USDIDR was flat.

Separately, some Chinese cities warned residents to maintain vigilance against coronavirus spread, amid relaxation of tough COVID-19 curbs in the world's second-largest economy.

Although signs of China softening its dynamic zero-COVID strategy supported countries across Southeast Asia initially, analysts said that the market has largely priced in the positive news.

HIGHLIGHTS:

** Thai consumer confidence at 20-month high in November

** Bank of Korea to boost repo purchase amount

** Philippines' forex reserves at $93.95 bln at end-November

The following table shows rates for Asian currencies against the dollar at 0603 GMT.