BENGALURU (Sept 8): Emerging Asian stock markets lost momentum on Tuesday, as South Korean shares gave up early gains on profit-taking, while risks of a prolonged conflict in the Middle East lifted oil prices and kept investors cautious.
The MSCI gauge of EM Asia equities, dominated by South Korea and Taiwan, slipped 0.4% after gaining nearly 1% earlier in the session.
South Korea's Kospi ended 0.6% lower after advancing 2.5% in intraday trade to hit its highest since mid-August.
"It (Kospi's drop) seems to be typical profit-taking, which we've seen play out before. The size of Monday's move alone was always going to invite some selling pressure," said Zavier Wong, a market analyst at eToro Singapore.
"Samsung and SK Hynix have been carrying this rally almost single-handedly, and we're seeing that initial excitement cooling a little."
Samsung Electronics ended 0.2% lower, while rival SK Hynix closed nearly 0.6% higher.
Taiwan's benchmark stock index closed nearly 0.5% lower after touching an 11-week high in intraday trade.
Stocks in Jakarta and Manila rose as much as 1.1% and 0.7%, respectively. Singapore shares slipped 0.7% and were headed for a second straight session of losses after gaining nearly 1.8% last week. Thai stocks edged higher to clock their fourth consecutive session of gains.
Among currencies, the Philippine peso saw some relief after weakening to a record low of 62.763 per US dollar on Monday. Market participants expect high oil prices to keep the currency under pressure.
Citi took some profits on its bearish Philippine peso position after less than a week of gains as the currency underperformed the Indonesian rupiah and the Indian rupee as expected, strategists led by global head of EM economics, Johanna Chua, said in a note on Tuesday.
However, they retained part of their bearish position, citing expectations of further weakness relative to regional peers.
Michael Wan, a senior currency analyst with MUFG, struck a contrasting note: "From a strategy perspective, we think the risk-reward to go long USD/PHP is not good."
"Among other things, given how sensitive PHP is to changes in global oil prices, any possible resolution in the US-Iran conflict could result in some positioning adjustments and PHP strength given oil prices are already trading close to the US$100 per bbl mark."
Wan forecast the Philippine trade deficit to narrow, headline GDP growth to improve and interest rates to go higher. He also expects the peso to appreciate to 62.20 per US dollar in the third quarter and 62.00 in the final quarter of the year.
Elsewhere, the Singapore dollar and Indonesia's rupiah gained marginally, while the Malaysian ringgit weakened nearly 0.3% to 4.057 per US dollar, its lowest in nearly three weeks.
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