Most Asian equity markets traded lower on Monday as political uncertainty in Thailand and Indonesia weighed on investor sentiment, though Indonesia’s strong trade performance helped the region’s largest economy recover from earlier losses.
Indonesia’s rupiah strengthened 0.33% and the Jakarta Composite Index pared losses sharply to trade down 0.83% after the country posted a stronger-than-expected July trade surplus.
Earlier in the day, Indonesia shares fell as much as 3.6% to 7,547.56 points, their biggest intra-day percentage drop in nearly five-months. The positive trade data helped offset concerns about political protests against controversial election law changes that have killed at least eight people and sparked fears of prolonged instability.
Bank Indonesia moved aggressively to defend the rupiah, which fell 0.95% on Friday as protests escalated.
Central bank monetary chief Erwin Gunawan Hutapea pledged currency intervention to ensure movements reflect fundamentals.
“This episode has heightened investor caution, reinforcing perceptions of elevated political risk, particularly given the nascent stage of the current administration,” said Jerry Goh, investment director of Asian equities at Aberdeen Investments.
“Despite the volatility, this presents compelling opportunities to accumulate resilient large-cap equities.”
Meanwhile, Thailand’s political crisis deepened after the Constitutional Court dismissed Prime Minister Paetongtarn Shinawatra on Friday for ethics violations, marking the fifth Thai premier stripped of office by judges since 2008.
The baht was little changed on Monday while the SET index gained 0.5%, though Thai stocks remain down 11.4% year-to-date, making them Asia’s worst performer.
“If there is a smooth transition to a new Prime Minister, similar to that in August 2024, then we do not expect there to be any significant policy changes or impact on the economy,” Goldman Sachs analysts wrote.
Regional markets reflected broader governance concerns across Southeast Asia. Philippine equities declined 0.25% while Singapore shares gained 0.12%. South Korean stocks fell 1.35% and Taiwan’s benchmark dropped 0.67%.
China bucked the regional trend with Shanghai stocks climbing 2.36% to flirt with fresh 10-year highs, while Hong Kong shares surged 0.45% supported by strong corporate earnings and continued investor confidence in Chinese innovation.
Currency markets mostly inched lower. The South Korean won weakened 0.28% while the Philippine peso declined 0.06%. The Indian rupee fell 0.09% and Singapore dollar strengthened 0.05%.
Meanwhile, Indonesia’s August inflation of 2.31% came in below expectations and within the central bank’s target range, providing room for further rate cuts to support growth.
Traders await key inflation data from South Korea, Malaysia, Taiwan, Vietnam, Thailand and the Philippines this week.
HIGHLIGHTS:
** Asia factory activity shrinks as US tariffs bite, China bucks trend
** India’s economy unexpectedly picks up steam – Reuters
