EMERGING MARKETS — Asia stocks ride AI rally, currencies inch higher

(.) For the week, South Korea closes flat, Taiwan up 2.2 Currencies inch higher as Taiwan dollar, ringgit gain Philippine stocks drop to over 15-week low; set for 3.4% weekly drop By Sherin Sunny Sept 18 (Reuters) — Equities in Asia's emerging markets gained on Friday, boosted by optimism around chipmakers in South Korea and Taiwan, while investors digested Bank of Japan's widely-expected interest rate hike. MSCI's emerging Asia equities index advanced as much as 1.9%, propelled by South Korean and Taiwan stocks which carry much of the index's weight.

South Korea's KOSPI and Taiwan's TAIEX closed up 2.7% and 1.9%, respectively, as regional chip stocks tracked overnight gains in U.S. peers. News around the deployment of advanced AI models, notably for pharmaceutical and drug discovery research has reignited optimism around monetization of AI, said Ecaterina Bigos, senior market strategist at BNP Paribas Asset Management. Both the regions' most AI-sensitive equity markets clocked heavy gains after OpenAi released its latest GPT-6 Astra earlier this month.

That wave has, however, been tempered by calls from industry experts to slow down the development of AI earlier this week. South Korean and Taiwanese equities remain structurally supported by demand for advanced chips and high-bandwidth memory, but the next leg higher may be more volatile, said Glenn Yin, director of research at ACCM. While the indexes' strength should continue attracting capital, any deeper semiconductor correction could quickly become a broader emerging-Asia de-risking event, added Yin. Additionally, a 1% drop in oil prices kept investor sentiment high in the two oil-importing markets, even as the price remained above $100 a barrel.

O/R The Bank of Japan raised interest rates to a 31-year high of 1.25% and signalled readiness to keep pushing up borrowing costs, joining European and US peers. The widely expected move, dissented on by two board members, highlights central banks' focus on global inflation risks generated by war in the Middle East, expansionary fiscal policies and surging demand for AI investment. The US dollar index was flat at 100.32, after edging back from a 2-1/2-month high on Thursday. MSCI's gauge of EM currencies edged higher, with Taiwan dollar and the ringgit gaining 0.2% and 0.3%, respectively, while the South Korean won dropped 0.2%.

Elsewhere in the region, Jakarta stocks shed as much as 0.6%. In energy import-reliant countries — Thailand pared earlier gains to trade flat, while the Philippines gave up nearly 1.7% to drop to over a fifteen-week low.

Highlights: * AirAsia's Fernandes says travel demand remains strong, current crisis 'far' less severe than COVID * Japan won't hesitate on more coordinated FX intervention, finance minister says * Foreigners sell Asian bonds for first time since March Asia stock indexes and currencies at 0737 GMT COUNTRY FX RIC FX DAILY FX INDEX STOCKS STOCKS % YTD % DAILY YTD % % Japan -0.86 -0.43 1.38 25.44 China India +0.13 -6.19 0.23 -10.74 Indonesia -0.03 -6.03 -0.54 -25.66 Malaysia +0.34 -0.64 -0.32 -0.64 Philippines -0.02 -6.19 -1.72 -3.25 S.Korea -0.17 +4.11 2.66 63.60 Singapore -0.09 +0.71 -0.19 21.61 Taiwan +0.21 -1.18 2.94 62.90 Thailand -0.02 -5.50 -0.09 25.59 (Reporting by Sherin Sunny in Bengaluru; Editing by Ronojoy Mazumdar) ((mailto:Sherin.Sunny@thomsonreuters.com;)