Asia stocks turn lower as U.S. yields rise; focus on Fed



BENGALURU, Jan 18 (Reuters) - Most emerging Asian stock markets turned lower on Tuesday as investors prepared for possible faster U.S interest rate hikes after Treasury yields hit pre-pandemic highs, while currencies also lost their shine as the dollar gained.

Equity markets in the region reversed the course around midday as investors braced for a more hawkish Federal Reserve, which is meeting on Jan. 25 and 26 with bets growing that the central bank would start tightening in March. U.S. markets reopen on Tuesday after a long weekend.

Treasuries jumped along the curve with two-year yields US2YT=RR , which track short-term rate expectations, crossing 1% for the first time since February 2020. Tighter U.S. policy could sap appetite for riskier assets in emerging markets.

The dollar =USD , initially unperturbed by the rise in U.S. yields, picked up as the session went on. Most Asian currencies held their ground, though some gave up their small early gains and dipped.

In Indonesia, whose bond markets are susceptible to foreign fund flows, the rupiah IDR= inched 0.1% lower, while stocks .JKSE dropped 1.4% to their lowest in nearly a month.

Following an early bump on the Thai government considering bringing back a quarantine waiver for vaccinated visitors, the baht THB=TH gave up much of its gains to trade 0.1% higher as investors pruned their bets.

"This push (baht's gains on quarantine waiver) may well be speculative, as there are still no signs that tourist inflows will return in sufficiently large numbers to justify sustained baht appreciation," OCBC analysts said.

Central banks in Malaysia and Indonesia will conclude their two-day policy meetings on Thursday, though no policy change is expected.

Elsewhere, the Bank of Japan maintained its ultra-loose monetary policy and upgraded its inflation forecast.

Stocks in Shanghai .SSEC gained 0.6%, a day after better-than-expected fourth-quarter economic growth was partly overshadowed by weak retail sales. The central bank had also cut a key lending rate and analysts expect more to come.

China's top economic planner said on Tuesday policymakers would quickly roll out more measures to boost demand.

In South Korea, the won KRW=KFTC advanced 0.2% while stocks .KS11 dropped 0.9%. Retail subscriptions opened on Tuesday for LG Energy Solution's $10.8 billion initial public offering and will close on Wednesday.

Philippine shares .PSI regained ground lost in the last two sessions, rising 1.7%.

Markets in Malaysia were closed for a holiday.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields up 0.89 basis point at 6.398%

** JG Summit Holdings Inc JGS.PS led gains in the Philippines, while International Container Terminal Services Inc ICT.PS and Aboitiz Power Corp AP.PS followed

Asia stock indexes and currencies at 0628 GMT COUNTRY

FX RIC

FX

FX

INDEX

STOCKS STOCKS

DAILY YTD %

DAILY YTD %

%

%

Japan

JPY=

-0.23 +0.19 .N225 -0.27 -1.86 China

CNY=CFXS +0.18 +0.18 .SSEC 0.56

-2.15 India

INR=IN

-0.25 -0.12 .NSEI -0.24 5.24 Indonesia

IDR=

-0.10 -0.56 .JKSE -1.41 -0.45 Malaysia

MYR=

-

-

.KLSE -

- Philippines PHP=

-0.31 -0.80 .PSI

1.66

3.11 S.Korea

KRW=KFTC +0.24 -0.10 .KS11 -0.93 -3.84 Singapore

SGD=

+0.04 +0.11 .STI

0.17

5.44 Taiwan

TWD=TP

-0.05 +0.20 .TWII -0.79 0.88 Thailand

THB=TH

+0.12 +1.15 .SETI -0.64 0.51
Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Kim Coghill and Subhranshu Sahu

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