Emerging Markets - Thai assets stumble amid border clashes, but Asia stocks rally on trade boost

The Star

24-07-2025

BANGKOK (Reuters): Emerging Asian stock markets held on to their rallies on Thursday, as a flurry of agreements between regional economies and Washington lifted investor optimism and increased their appetite for riskier assets.
The MSCI index of emerging Asian equities rose as much as 0.5% to its highest level since September 2021, while a sub-index tracking ASEAN stocks, led by heavyweight Singaporean banks, hit a 10-month peak.
However, Thailand diverged from the rally as the baht was the only emerging Asian currency to weaken, while the benchmark SET Index fell 1.1%, as escalating border tensions with Cambodia unnerved investors.
A Thai F-16 fighter jet bombed targets across the border, both governments confirmed, after weeks of rising friction over disputed territory erupted into violence, leaving at least 11 civilians dead.
Analysts at Phillip Securities said the heightened geopolitical risk had undermined expectations for cross-border trade, making it unlikely the two nations will meet their 480 billion baht ($14.88 billion) bilateral trade target by 2027.
However, driving the rally in Asia was growing conviction that more trade pacts with the United States could follow recent deals signed with Japan, Vietnam, Indonesia and the Philippines.
These agreements, struck at tariff levels lower than initially feared, have soothed fears of a prolonged trade war and reinvigorated risk-on sentiment across the region.
"The Philippines and Japan trade deals put the pressure on South Korea and the rest of emerging markets to secure one," said Trinh Nguyen and Kelvin Tong at Natixis.
"Putting together the latest deals (Japan and the Philippines), it becomes increasingly clear that 10% is the new zero and economies are conceding to a higher but still manageable tariff level to secure market access to the US," they said.
Indonesia continued its sharp ascent, adding 0.9% on the day and extending its rally to roughly 10% over the last 14 sessions.
The index has fallen just once during that stretch, snapping an 11-day winning streak earlier this week.
A recently concluded trade agreement with Washington, which included reduced tariff threats, alongside dovish signals from the central bank, has driven sustained foreign inflows.
Singapore's benchmark also rose 0.7%, while equities in Malaysia, Taiwan and China advanced between 0.2% and 0.6%, underscoring broad regional strength.
In currency markets, the upbeat trade outlook sparked a retreat in the U.S. dollar, lifting emerging market currencies across the board.
The MSCI global EM currency index rose to its highest in over two weeks.
The South Korean won led regional gains, climbing 0.5% to its strongest level since July 8, helped by data showing the economy expanded at its fastest pace in over a year during the second quarter.
Elsewhere, the Philippine peso, Malaysian ringgit and Singapore dollar appreciated between 0.1% and 0.2%. - Reuters