EMERGING MARKETS-AI boom, Fed rate cut bets take Asia stocks to multi-year highs

* U.S. futures imply 95% chance of October rate cut * Shares in Taiwan, Seoul, Singapore hit record highs * Malaysia stocks highest since January * Currencies trading in a tight range (Updates for afternoon trade) By Rishav Chatterjee Oct 2 (Reuters) – Stocks in South Korea, Taiwan, and Singapore scaled records on Thursday and broader emerging Asia equities hit multi-year highs, fueled by AI-related frenzy and softer U.S. jobs data that stoked bets of another Federal Reserve rate cut this month. The MSCI EM Asia Index climbed as much as 1.8% to its highest level since June 2021, marking a fourth straight day of gains. A broader gauge of equities in Asia excluding Japan hit its highest level since March 2021. "Most markets in Asia remain substantially cheaper than their counterparts in the West. That, plus evolving investor mindset about risk exposures, bodes well for most of the region's stock markets in our view," said analysts at DBS in a note. South Korean chipmakers Samsung Electronics and SK Hynix surged 3.5% and 9.9%, respectively, after they secured a deal to supply memory chips for OpenAI's data centres, highlighting how the global race for computing power is fuelling semiconductor demand. In Taiwan, the benchmark jumped 2% to a fresh record, with chipmaker TSMC leading the rally on a 3% gain. Seoul’s KOSPI advanced 3.2% to a new high, supported by September exports that rose at their fastest pace in 14 months. Optimism spilled over to other markets in the region. Singapore’s benchmark gained 1.9% to a fresh high, with underlying strength in big banks boosting DBS shares by 2.7%. Malaysia and Indonesia added 0.9% and 0.4%. The former traded at its highest since early January. Emerging Asian currencies, however, remained range-bound, pressured by the U.S. government shutdown. Traders are pricing in potential Fed rate cuts as U.S. labour market data signalled a slowdown, a dynamic that lifted tech and chip stocks on Wall Street and spilled over into Asia. Futures now imply a 95% chance of a Fed rate cut in October, up from 90% a day earlier, with a 75% probability of another move in December.. However, subdued 2026 growth expectations for EM could cap currency gains, even as stronger fiscal balances and policy credibility provide some support, cautioned Phoenix Kalen, managing director and global head of emerging markets research at Societe Generale. Softer EM growth, she noted, contrasts with a brighter U.S. outlook, limiting the "pull" factors for EM FX while leaving room for strength on the rates side. The U.S. dollar regained some footing. The South Korean won, the Thai baht and the Philippine peso were flat. The Taiwan dollar rose 0.2%. HIGHLIGHTS ** Indonesian 10-year benchmark flat at 6.321% ** POLL-Investors broadly bullish on Asian currencies; rupiah, rupee most shorted ** China and India markets closed for public holidays Asia stock indexes and currencies at 0703 GMT Japan -0.09 +6.79 0.87 14.32 China India -3.47 5.04 — — Indonesi -0.06 -3.13 0.43 14.10 a Malaysia +0.02 +6.28 0.86 -0.46 Philippi -0.06 -0.14 0.23 -7.49 nes S.Korea Singapor -0.02 +6.01 1.73 16.11 e Taiwan +0.16 +7.83 1.52 14.51 Thailand -0.06 +5.73 1.30 -7.76 (Reporting by Rishav Chatterjee in Bengaluru; Editing by Subhranshu Sahu and Janane Venkatraman)

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