Asian stocks have shown resilience in the face of the latest US Federal Reserve rate hike and the ongoing challenges in China’s economy.
The Fed raised its benchmark rate by 25 basis points to a range of 5% to 5.25% on Wednesday, as expected, but signaled a possible pause in June and ruled out rate cuts in 2023. Meanwhile, China’s growth outlook remains uncertain amid regulatory crackdowns, power shortages and Covid-19 outbreaks.
However, investors have largely shrugged off these headwinds and focused on the prospects of policy easing and recovery in the region. According to Bloomberg data, Asian stocks have gained 4.2% in May so far, outperforming global peers. The MSCI Asia Pacific Index is on track for its best month since November 2020.
Some of the best performers in Asia include Hong Kong, where the Hang Seng Index has risen 7.3% this month, boosted by bargain hunting and strong earnings from technology giants such as Tencent and Alibaba. South Korea’s Kospi Index has also advanced 6.4%, supported by robust exports and corporate profits. Taiwan’s Taiex Index has rebounded 5.8% after a sharp sell-off in April due to a surge in Covid-19 cases.
Other markets that have fared well include Indonesia, India and Thailand, which have benefited from improving domestic conditions and foreign inflows. Indonesia’s Jakarta Composite Index has climbed 5.9% this month, as the country has eased some pandemic restrictions and ramped up its vaccination program. India’s Sensex Index has gained 4.9%, as the second wave of Covid-19 infections has subsided and foreign investors have returned after a record exodus in April. Thailand’s SET Index has added 4%, as the government has announced more stimulus measures and tourism has shown signs of recovery.
Of course, there are still risks and challenges ahead for Asian stocks, such as inflation pressures, geopolitical tensions and virus variants. But for now, it seems that the region’s equity markets are well-positioned to weather the storm and capitalize on the opportunities.