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Asian Equities Advance on China Stimulus Bets, FX Muted

Most Asian equities gained on Thursday, with prospects of support measures from Chinese authorities boosting sentiment, even as data showing persistent deflationary pressures in the world's second largest economy raised concerns about its economic recovery. 

Equities in China climbed 0.8%, recovering for a third straight session after touching a five-year low on Monday. 

Other regional equities also advanced, with shares in Philippines rising as much as 1.5%, hitting their highest level in a year. 

China replaced the head of its securities regulator on Wednesday, the official Xinhua news agency said, in the latest of a slew of measures by authorities to stabilise the market ahead of the long Lunar New Year holiday.

"Chinese policy inclination is clearly to bolster markets into holidays," said Wei Liang Chang, FX and credit macro strategist at DBS Bank. 

"These measures underpin a dramatic shift towards anchoring investor sentiment, although continued fiscal support remains crucial to reinforce China's recovery." 

The country's economy is still reeling under persistent deflationary pressures with China's consumer prices suffering their steepest fall in more than 14 years in January, ramping up pressure on policymakers to do more to revive the economy. 

Meanwhile, the Reserve Bank of India kept its key rate unchanged for a sixth straight meeting, as expected, with inflation in the country remaining above the central bank's 4% medium-term target. 

The Indian rupee was flat while equities retreated 0.6%. 

The Bank of Thailand (BOT) also kept its key interest rate unchanged for a second straight meeting on Wednesday in a 5-2 vote, resisting government pressure to reduce borrowing costs to revive faltering growth. 

"Despite the dissenters, we view the tone of the meeting as broadly neutral," Goldman Sachs analysts wrote.

"Although, given significantly slower growth and inflation forecasts, we now see a significant risk of policy rate cuts from the BOT this year," they added.


The Thai baht retreated 0.4% while equities were down 0.5%. 

Other regional currencies were muted after comments from Federal Reserve officials indicated little urgency to cut interest rates until they have confidence on the inflation trajectory.

Markets are now awaiting fresh US economic data for further rate cut clues. 

Markets in Indonesia and Taiwan were closed for a holiday. The Philippine central bank is due to announce its interest rate decision next week.

The Bangko Sentral ng Pilipinas reinforced its hawkish stance on Tuesday, noting upside risks to the inflation outlook despite slower annual inflation in January. 

Indonesia's presidential and legislative elections next week also remain on investors' watch list. 

Source: The Edge Markets               w

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