Asian stocks rebound after Fed's hawkish policy

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  • Asia shares rebound from Thursday's sell-off
  • Some Asia c.banks can afford to normalise policy faster - strategist
  • Thailand keeps 2022 GDP outlook at 4% growth

Jan 28 (Reuters) - South Korea led a rebound in Asia's emerging market shares on Friday, but were set for their biggest weekly decline since the onset of the pandemic, as investors brace for a year of aggressive rate hikes from the U.S. Federal Reserve.

Shares in Seoul (.KS11) rose 1.9% to pare some of the heavy losses recorded over the last few days, but were still on course for a nearly 6% weekly drop. The won weakened 0.3%.

U.S. stock futures rose in Asia trade, while equities in Mumbai (.NSEI), Bangkok (.SETI) and Shanghai (.SSEC) traded 0.2% to 1.3% higher, recouping some losses made in Thursday's aggressive share sell-off.

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Traders in the fed funds futures market moved to price in nearly five rate hikes this year in the wake of Fed Chair Jerome Powell's remarks on Wednesday, starting with the March meeting.

Currencies in the region, which have suffered some losses over the course of the week against broad dollar strength, saw modest gains. India's rupee , Indonesia's rupiah and Malaysia's ringgit rose between 0.1% and 0.2%.

China's yuan recovered some lost ground against the dollar following its biggest one-day weakening in more than seven months, though trading was subdued in the approach to the Lunar New Year holiday.

"Pressure on Asian FX is likely to be most acute in the weeks preceding, as markets increasingly price in rate hikes, and in the immediate aftermath, of the first Fed rate hike. Pressures dissipate soon after," said Mitul Kotecha, chief EM Asia and Europe strategist.

Central banks in Asia have not been pressured to pursue interest rate hikes as aggressively as their peers in Europe and Latin America.

However, the prospect of higher U.S. interest rates has left regional policymakers balancing the need to protect economic recovery, while stemming potential outflows that could weaken current account surpluses.

"ASEAN growth catch-up and better readiness to deal with COVID suggests that some central banks in Asia can afford to normalise policy faster," said Christopher Wong, senior FX strategist at Maybank.

Earlier this week, Indonesia's central bank governor Perry Warjiyo said that early signs of inflation might be seen at the end of this year, while the Bank of Korea and Monetary Authority of Singapore have already begun monetary policy tightening.

Meanwhile, Thailand's finance ministry maintained its 2022 economic growth forecast at 4.0%, but trimmed its export outlook for the year. read more

The tourism-reliant country also maintained its 2022 forecast for foreign tourist arrivals at seven million, but reduced its export growth projection to 3.6% from 3.8%. The baht was 0.2% weaker.

HIGHLIGHTS

** In South Korea, Samsung Electronics (005930.KS) and peer SK Hynix (000660.KS) climbed 3.2% and 7.1%, respectively

** Indian shares (.NSEI) up as much as 1.5% - their biggest intraday pct gain since Jan. 3

** 10-year benchmark bond yields in Malaysia , Indonesia and India surge further

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Reporting by Harish Sridharan in Bengaluru; Editing by Shailesh Kuber

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